Sahara & the art of eating Dosa
Sahara India Pariwar follows its own methods of reporting financials. Being largely unlisted, it probably is entitled to report as it pleases. There is no obligation on unlisted companies to publish financials in any fixed format or regularity. So, you have from recent advertisements a set of numbers which are clubbing of figures from some regulated entities such as life insurance company, mutual fund and some that operate in unregulated areas such as retail.
Since I am no trained accountant, I do not come with the baggage of accounting conventions and principles, may be I am your best shot to understand the accounts of somebody who doesn't care for these. In a novel reporting method, it gives under the head group liability, the total money raised from crores of account holders for the past 34 years beginning 1978. This is put at some Rs 2,25,000 crore. Of this, the group says it has refunded to 147 million account holders, Rs 1.7 lakh crore. This refund figure is likely to include Rs 17,000 crore refunded after RBI move to unwind the RNBC venture in 2008 and Rs 33,000 crore of optionally fully convertible debenture (OFCD) refunds made over the past year or so.
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That leaves us with Rs 54,636 crore as “net outstanding liability". This Sahara says is accrued interest. If OFCD is refunded and RNBC is wound down, who does Sahara owe this humongous sum to. When was this amount raised? To put things in perspective, the largest Indian initial public offering raised Rs 15,000 crore. This entire year, Indian companies have struggled to raise even a few hundred crores from Indian market. The advertisement gives some clue. The liability is towards Sahara Q-shop Advance, Sahara Cooperative Credit Society, Life Insurance and Mutual fund. It also mentions Indian and overseas bank loans. Let us break these down. Sahara Life Insurance has raised new premium of Rs 550 crore between 2005-06 and 2010-11, according to Irda’s annual report.
For the year ended 2010-11, it had first year premium figure of Rs 91 crore. As of September, the mutual fund company had an AUM of Rs 238 crore. It is common knowledge in Indian banking industry that banks’ exposure to the group is minimal, especially after RBI moves. The group itself says the foreign loans at Rs 2,836 crore. This means in Sahara Q shop, which was launched earlier this year and Sahara Cooperative credit Society which was launched after the legal tussle with Sebi began, the bulk of Rs 54,000 crore odd liabilities reside. This is what Sebi has been hinting to in its advertisements. This is probably why the OFCD outstanding that was Rs 24,029 crore a year ago shrank to Rs 5,120 crore last week. I am leaving the rest to your imagination. But, did you ask what about the Dosa? My grandmother once told me a story about a king who wanted to capture his lost kingdom. He repeatedly attacked the capital and failed each time. When he was tired and was about to give up, he overheard a conversation between a mother and his kid, who was trying to eat the dosa from the middle and getting his fingers burnt. Mother scolded the son: “Don’t be like our stupid king and go for the centre, which is the hottest. Start from the edges, where it is a lot cooler."
The king sprang up, marshalled his forces, attacked the fringes, gained strength and confidence and eventually won back the kingdom. People dealing with Sahara should first learn eating the dosa.