Legal Challenges and Regulatory Scrutiny
In 2012, the Securities and Exchange Board of India (SEBI) accused two Sahara firms of raising approximately Rs.240 billion (around $3.9 billion) through optionally fully convertible debentures (OFCDs) deemed illegal. The Supreme Court of India ordered these firms to refund the money to about 22 million small investors within 90 days, along with 15% interest. Sahara contended that it had already repaid most investors and disputed the amount claimed by SEBI. Despite these assertions, SEBI froze the firms' bank accounts in February 2013 for failing to comply with the refund order.
The situation escalated in February 2014 when the Supreme Court issued a non-bailable arrest warrant against Subrata Roy for failing to appear in court regarding the refund case. Roy cited his mother's ill health as the reason for his absence. Subsequently, he surrendered to the police in Lucknow and was taken into custody. His arrest drew significant media attention, especially when a protester threw ink on him as he arrived at the Supreme Court. The court ordered his continued detention until Sahara presented a concrete plan to repay investors.
Asset Liquidation and Financial Repercussions
To raise funds for the mandated refunds, Sahara initiated the sale of several high-profile assets. In July 2018, the group sold its controlling stake in New York's iconic Plaza Hotel to Katara Hospitality for approximately $600 million. This move was part of Sahara's broader strategy to liquidate international assets to meet its financial obligations.
In India, Sahara's flagship property, the Sahara Star hotel near Mumbai's Chhatrapati Shivaji International Airport, remained under its ownership. The group also ventured into the retail sector with the launch of 'Sahara Q Shop' in 2012, aiming to provide adulteration-free consumer merchandise. Despite ambitious plans, including the opening of 315 outlets across 10 states on a single day in April 2013—a feat recognized by the Guinness World Records—the venture faced challenges amid the group's ongoing financial and legal troubles.
Impact on Business Operations and Workforce
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medium;"> The legal battles and asset sales had profound implications for Sahara's business operations and workforce. Once boasting over 1.1 million workers, making it India's largest private-sector employer, the group's employee strength dwindled as various businesses were downsized or shuttered. The financial strain also affected Sahara's sponsorships and stakes in sports entities, including its association with the Indian hockey team and ownership in the Formula One racing team, Force India.
medium;"> The legal battles and asset sales had profound implications for Sahara's business operations and workforce. Once boasting over 1.1 million workers, making it India's largest private-sector employer, the group's employee strength dwindled as various businesses were downsized or shuttered. The financial strain also affected Sahara's sponsorships and stakes in sports entities, including its association with the Indian hockey team and ownership in the Formula One racing team, Force India.Subrata Roy's Legal Struggles and Public Perception
Subrata Roy's personal legal struggles became emblematic of Sahara's broader challenges. His arrest and subsequent detention were widely covered in the media, leading to debates about corporate governance and regulatory oversight in India. Critics questioned the special treatment he allegedly received during his detention, such as being housed in a forest department guest house rather than a standard jail, highlighting perceived disparities in the treatment of influential individuals within the justice system.
Efforts to Revive and Diversify
Despite the setbacks, Sahara made attempts to revive and diversify its business portfolio. The group maintained interests in insurance through Sahara India Life Insurance Company Ltd., which was notable for being the first wholly Indian-owned life insurance company without foreign collaboration. Additionally, Sahara managed various mutual funds under Sahara Asset Management Company Pvt. Ltd., with some funds receiving accolades for performance.