Archive for the ‘Business’ Category

There are a few business groups in India which are often shrouded in mystery and controversy. Their dealings, activities, plans, political affiliations are often discussed in a hush – hush tone by the press. Not a lot is often known about them. A few of such famous business houses include the Sahara Group headed by the often mysterious Subrata Roy, the Adani Group headed by the its reclusive Chairman Gautam Adani, the UB Group headed by the flamboyant Vijay Mallaya, and the real estate giant DLF headed by KP Singh.

What is also common among the groups mentioned above is often their poor corporate governance record. Several accusations have been levied against these groups in the past. However, each of these groups have emerged unscathed from these controversies. The Iceman will in a series of posts, discuss his views about each of these business groups starting with the Sahara Group.

I have always been intrigued by the background of the Sahara Group. Not a lot is know about their business especially in the South India. The Group biggest claim to fame is in being the Indian Cricket team’s sponsor for the last decade. The inspiration to write about the Sahara Group was due to this article in Outlook Business. The article is quite well researched and it accuses the Sahara Group’s real estate arm of duping its customers, poor corporate governance practices including shady related party dealings intended to short-change prospective investors in its IPO. I must admit that, it is quite rare to find such an article against a business house in the Indian media which has shown no hesitation in being used as tools of promotion by business groups quite often in the past. My contacts in the media industry inform me that this phenomenon of “paid news articles” is quite rampant. So, I set about doing my bit of research on the Sahara Group which forms the basis for this post.

The Sahara Group (or) the Sahara India Parivar is headed by Mr. Subrata Roy Sahara whose official title, believe it or not, is “Managing Worker and Chairman”. Mr. Roy holds a Diploma in Mechanical Engineering. The Group claims that the Sahara India Pariwar has an all India presence with over 9.1 lacs workers and assets over Rs.50,000 crores. However, none of the Group’s ventures are publicly acknowledged successes. In fact, several ventures other than the RNBC are believed to have accumulated huge losses over the years. The Group sold its failed airline venture to Jet Airways. Despite this, the Group finds spare cash to splurge on the sponsorship of the Indian cricket team as well as the humongous bid to acquire the Pune IPL team early this year. The Group was also in the news recently in a rumored bid to acquire Liverpool FC as well as its bid to become the main shirt sponsor of the Manchester United FC. The Group’s official website lists its various business interests as follows:
a) Finance
b) Infrastructure and Housing
c) Media & Entertainment
d) Consumer Products
e) Manufacturing
f) Services & Trading

However, what is striking when one goes through the Group’s official website is the obvious attempt to appear as a socially conscious business group. The Group has always tried to lend its name to social causes, patriotic causes and sporting ventures to build a image of trust amongst the Indian population. A case in point is the corporate presentation available on the Group’s website which indulges in a shameful promotion of the Group’s so-called CSR and other social initiatives, pushing the details of the Group’s various business ventures to the background. What one gets to see several times are trumpeting about the “World’s largest family”, and patriotic odes to India including one that simply stumped me – “The swirl of the tricolour never fails to move a Sahara worker”. The Group’s philosophy is apparently “Collective Materialism”. What this exactly means is anybody’s guess. The Group’s profit sharing philosophy is claimed to be “40% towards welfare of kartavyayogi workers, 35% towards Company net-owned funds and 25% towards social development activities”. The Group also claims that it treats its employees so well that there is no need for any trade unions in its organisations. The Group’s various sporting initiatives are trumpeted in many places. Photos of Mr. Roy with famous personalities like Atal Behari Vajpayee, Bal Thackeray, Dalai Lama, Baba Ramdev, Shahi Imam of the Jama Masjid, Pratibha Patil, APJ Abdul Kalam, Manmohan Singh, Sonia Gandhi, Dhirubhai Ambani, Lord Swaraj Paul, Ratan Tata, Adi Godrej, Bill Clinton, Goldie Hawn and Michael Douglas (I have no clue why? Probably Mr. Roy was a big fan) find a part in the corporate presentation for some inexplicable reason. The presentation ends with a photograph of the Indian Cricket team.

Sahara’s finance business is supposed to be the Group’s cash cow and its claim to fame. Sahara India Financial Corporation Limited (SIFO) is a “Residuary non-banking Company“. SIFO is also the sponsor of Sahara Mutual Fund and the co-promoter of Sahara India Life Insurance Company Limited. Not much information is publically available about SIFO other than information made available by the Company itself. There have been random articles in the press about actions taken by RBI against SIFO for several alleged non-compliances. To the credit of the Sahara Group, none of these allegations have been substantiated, and the RBI has not publicly questioned the way SIFO operates. However, the whispers don’t seem to die and come up quite frequently. Interestingly, the 4 member board of the SIFO includes Mr. TN Manoharan a former president of the ICAI and a recipient of the Padma Shri award. Mr. Manoharan is also the chairman of the audit committee of SIFO.

Sahara Life Insurance is claimed to be first wholly Indian-Owned private life insurance company. However, precious little is know about the size and nature of portfolio and clients of this Company. Based on the audited financial statements of for FY 08-09, Sahara Life Insurance made a loss of Rs. 18.15 crores on total income of Rs. 183 crores. The accumulated losses piled up by the life insurance venture of the Sahara Group aggregates to Rs. 28.74 crores, on a capital base of Rs. 232 crores. The data for FY 09-10 is not available on the Company’s website. It is apparent that the size of this Life Insurance Company of the Sahara Group is quite minuscule when compared to its peers in India. Sahara Mutual Fund’s website lists 18 funds administered by it. However, the profitability of this venture is not known.

To be continued.