One of them is Anil. The 30-year-old travel agent put his 200,000 rupees ($3,276) in another investment scheme offered by Sahara, which bills itself as “the world’s largest family.” He fears that the case could hurt his investment.
“I have told my agent to surrender my deposit (partially) … I am worried, but my money will come back, my agent has said,” Anil told India Insight, declining to give his last name. “I will hesitate a bit to invest any money now. If the court case goes on, I will redeem all my Sahara investments.”
Roy, the 65-year-old head of the privately held Sahara conglomerate which has business interests from shopping malls and life insurance to finance and real estate, was sent to Delhi’s Tihar Jail on Tuesday. Police arrested him after his company failed to comply with a Supreme Court order in 2012 to repay investors in the bond scheme, which the court has said was illegal.
Sahara, also famous as the former sponsor of India’s national cricket team, has a net worth of $11 billion, more than 36,000 acres of real estate and 1.1 million salaried and field workers, according to its website. It also co-owns the Sahara Force India Formula One auto racing team with liquor baron Vijay Mallya.
The lawsuit concerns two unlisted Sahara group companies which started raising funds in 2008. After the Indian market regulator intervened, the Supreme Court told the company to repay more than $3 billion with interest to its millions of investors.
But market regulator SEBI brought contempt proceedings against Roy and Sahara for failing to comply with the court’s order. Sahara has said that it repaid most investors and that its remaining liability was less than the 51.2 billion rupees ($839.1 million) that it deposited with the regulator.
Sahara’s investment programmes include schemes that are similar to a typical Indian bank’s fixed or recurring deposits. The company largely sells such schemes to small investors in towns and rural areas through their network of agents. These financial products allow investors to deposit small amounts such as 50 rupees a day (less than $1) for returns that some agents and investors said are higher than what bank deposits generate.
Zia-ul Haq, who runs a small departmental store in Uttar Pradesh and invests less than 50 rupees daily in the Sahara “Minor” scheme, said the Sahara agent who collects his money has assured him about his investment.
“There is some worry, but I am confident … It is natural that if you have invested money somewhere, you will be worried in such cases,” he said. “There is always a risk in private (companies).”
While there is no official company website which explains Sahara’s investment schemes, agents and investors used names such as “M-Benefit” and “Minor” to identify some of the schemes. Sahara also issues a computer-printed receipt with hologram and passbooks as proof of investment, according to documents seen by this reporter.
The court case has made life tougher for agents who pitch these schemes. Deshdeepak Parashar has been selling Sahara schemes in the Pratapgarh district of Uttar Pradesh for the last three years, and has about 150 clients, including Haq. He is finding it hard to look for new customers.
“Customers called me and were worried about losing their money when [Roy] was called to the court. I have received no calls after the arrest,” said Parashar, adding that investors do not want to be associated with Sahara right now.
“When people start pressing me too much, I feel depressed. I have been thinking of switching the business for a year,” he said. “I want to be associated with LIC (Life Insurance Corporation of India).”
Delhi-based agent Ravi Kumar, who has been selling Sahara schemes for two months, hopes business will pick up once the court case is settled. “There has been some negative response in the market. We are not approaching new investors right now,” said the 35-year-old real estate company employee who sells Sahara investment products on the side.
Sahara agents typically file investment documents at local offices. One Delhi branch is tucked away in a crowded area near Paharganj, a place famous for low-cost hotel rooms and much frequented by backpacking foreigners. A narrow, dark staircase leads to a second-floor Sahara office. From the street, lined by furniture shops, a dusty old board with the company’s name is barely visible.
Agents outside the office hesitated to speak with reporters. One agent asked for this reporter’s identification card, but refused to share much information about how investors are reacting to the case. “People are (a) little worried now, party (client) is saying Subrata Roy is in jail,” said another agent.
A second man, who said he deals in Sahara deposits, said, “Do something else, you are wasting your time … everything will be fine in two, three days. There is nothing wrong. Why will you visit the office? You should do something else.”
Another Sahara office in old Delhi’s Nicholson street is flanked by vegetable sellers, bullock carts and rickshaw pullers. The office is located in a colonial-style building around shops selling auto parts. Inside, an investor sat with his payment receipts as three agents wore black armbands in protest of their chief Roy’s arrest.
Neeraj Joshi, an employee of the Sahara group’s Hindi newspaper Rashtriya Sahara, said many employees in his Nainital office in the state of Uttarakhand are also protesting silently in a similar fashion.
Joshi, who has investments of about 80,000 rupees ($1,310) in Sahara deposits, is not worried about his holdings. “The company is not run by one person,” said Joshi. “We still have faith that this man will get himself out of trouble.”