The finance ministry and several agencies under it such as the Securities and Exchange Board of India (Sebi) and the Enforcement Directorate (ED), which are investigating the affairs of Sahara India Parivar, are worried about its exposure to National Spot Exchange Ltd (NSEL) products.
The convergence of the two groups, which are fighting serious regulatory charges, has driven the official circles into a tizzy.
A ministry official said: “The Sahara involvement is one of the reasons that triggered the proposal to bring the Forward Markets Commission (FMC) under the finance ministry control.”
According to the figures released by NSEL on Tuesday, Sahara Q Shop Unique Products emerged as the largest investor among the 108 clients listed by the Indian Bullion Markets Association (IBMA).
IBMA, an entity promoted and controlled by NSEL itself and headed by its former chief executive Anjani Sinha, is also under the regulatory scanner.
The FMC, the commodities markets regulator, has directed NSEL to withhold payments to IBMA, since it is a related entity. IBMA’s clients form the largest group of claimants with an outstanding of Rs 1,170 crore (Rs 11.70 billion).
In response to an email seeking comments, a Sahara group spokesperson said: “Sahara Q is a brand, having the largest repertoire of products under its gambit with more than 700 products in the processed food, personal care, home care, consumer durables and general merchandise.”
Explaining the rationale for the NSEL exposure, the spokesperson said: “Running into the agri-commodity business on a long-term basis was intrinsic to our business and to look at ways and means where we could buy products directly from the miller/producer so that desired quality products can be obtained and also able to keep our prices very competitive for the benefit of our costumers. Also, we look at it as a short-term investment portfolio to maximise our return.”
Sahara also suggested the amount invested did not come from investors. “With these objectives, Sahara Q Shop, from its own seed capital and working capital, deployed Rs 226 crore into agri-commodity trading at National Spot Exchange through Indian Bullion Market Association as our broker. Under which, the majority investment was done in paddy and sugar, which is also our highest selling products.”
Sahara Q Shop is under the Sebi, ED radar following allegations that it had received funds which were transferred from two real estate firms Sahara--India Real Estate Corp (SIRECL) and Sahara Housing Invest Corp (SHICL).
In newspaper advertisements issued in October last year, Sebi told investors in the optionally fully convertible debentures (OFCDs) issued by SIRECL and SHICL “not to yield to any pressure from any person, including Sahara or its agents, for converting or switching their existing investments in the bonds to any of the other schemes like Q-shop, etc”.
Last August, SIRECL and SHICL were directed by the Supreme Court to refund Rs 24,029 crore collected from some 29.6 million OFCD investors. However, the companies have since claimed they already refunded a substantial portion directly to investors. Sebi is contesting this claim and has filed a contempt petition. A Supreme Court hearing on the matter is expected to resume on August 26.
After regulatory bans on money raising in other modes such as para banking and OFCDs, Sahara launched Q-shop, another investment scheme, which is being marketed as a retail venture. Star cricketers, including Mahendra Singh Dhoni and Sachin Tendulkar, have been part of a high profile campaign to promote Q-shop as a fight against adulteration (milawat se jung) in food and other consumer products.
The Sahara involvement in the NSEl issue triggered the proposal to bring FMC under the finance ministry control
Sahara Q Shop is the largest investor among the 108 clients listed by the Indian Bullion Markets Association, promoted by NSEL
FMC has directed NSEL to withhold payments to IBMA, since it is a related entity
Sahara group says Q Shop has deployed Rs 226 cr into agri-commodity trading at NSEL through IBMA