Book Reviews
Sahara: The Untold Story - Book Review

The story of the most bizarre Indian business

 

Sahara: The Untold Story by Tamal Bandyopadhyay is a unique book. It starts and ends (on the back cover) with a strongly worded statement from the Sahara group. Perhaps this is also the first book published in India where both, the author and the subject, agreed on 'limited information’ part in the book. Bandyopadhyay’s use of a term like ‘India’s most secretive’ for the Sahara group explains why this book contains ‘limited information’. The Sahara group had approached the court to stop publication of the book. However, later it withdrew the case on the condition that it should be allowed to print its own disclaimer in the book.  
 
The book depicts the 37-year journey of India’s most ‘secretive’ and unlisted ‘conglomerate’, the Sahara India Pariwar and its chief Subrata Roy, through the eyes of a journalist. However, the book is not merely about Sahara group or its chief Subrata Roy. It tells us about the financial world’s dark secret—shadow banking. It shows how an all-powerful group can easily open a new door when an old one closes. 
 
When it comes to raising money from the public, one cannot ignore the phenomenon called Peerless and residuary non-banking company (RNBC). Both Peerless and Sahara (in the initial stages) acceded to the demands of the Reserve Bank of India (RBI). Peerless fell in line and restructured its board and refunded money to investors. Sahara, on the other hand, while making amends with RBI’s ‘instructions’, was raising money through its optionally fully convertible debentures (OFCDs).  
 
And then, one fine day, Sahara decided to enter the capital market with the strange OFCD offering and thus dug its own grave. 
 
According to Bandyopadhyay, the Sahara group chief had under his belt 4,799 establishments, almost equal to the universe of listed companies in India. “This might have gone unnoticed but for Roy’s plan to list one of his group companies, Sahara Prime City Ltd. On page 640 in the disclosure section of the 934-page draft red herring prospectus (DRHP) of Prime City filed before SEBI (Securities and Exchange Board of India), one critical piece of information was tucked away which the market regulator latched on to. 
 
This was a certain tax-related issue in regard to OFCDs, which Sahara India Commercial Corp Ltd (SICCL) was fighting out with the income tax authority. This was related to a Rs35.57 crore disputed income tax that was imposed on the company for accepting OFCDs worth Rs20,000 crore or more from many investors through cash and not account payee cheques or demand drafts, as required under the Income Tax Act, 1961.
 
SEBI sought clarification from Sahara about the OFCDs; Sahara defied it. This started a chain of reactions that finally led to the detention of Mr Roy on the orders of the Supreme Court. Bandyopadhyay’s book chronicles all the incidents in a simple, news-oriented approach, i.e., he describes them as they happened.
 
But Sahara is not just about finance. Subrata Roy was, after all, sponsoring the Indian cricket team and counted among his friends the who’s who of India. During his visit to Sahara Shahar in Lucknow for an interview with the group chief,  Bandyopadhyay got a first-hand account of Mr Roy’s penchant for glamour and his association with film stars, cricketers and politicians. Asked about why he chose the company of actors and cricketers, Mr Roy told Bandyopadhyay,  “We have to take care of human psychology in every aspect—whenever the performance is strong, the faith is more. Renowned people give them security. Glamour plays a positive role. People jump on to film actors, they go mad. We believe in glamour.”
 
Overall, the book is a good read. The book, which was finalised before Mr Roy was jailed, also tries to predict the future growth and the possible route that Sahara group may take. But, for that, you need to read the book till the end.

User

COMMENTS

Veeresh Malik

2 years ago

Months later hardly any unhappy unpaid depositors have come forward to claim refunds it seems.

MOHAN

3 years ago

Another untold story:

Refund Rs 49,000 cr to investors: SEBI to PACL


http://www.business-standard.com/article...

dip

3 years ago

Subrata Roy must be credited for the tremendous PR abilities. He created a few things. He went wrong in underestimated the 'System'. Taking on the judiciary is a most audacious way was start of his downfall. Knee jerk reactions?

What is illegal is subject to today's law. Money laundering? Difficult to believe as no politician worth his/her salt will deposit his money with a third person. Will buy the book.

The Dollar Trap - Book Review
Why US dollar will continue to be the world’s reserve currency, despite obvious flaws
 
The US dollar has been the king of currencies for decades. Foreign investors regularly pour billions of dollars in financial assets denominated in dollars, allowing the US government and households to maintain high levels of consumption through cheap borrowing, something that many experts have declared to be unsustainable. 
 
Therefore, numerous articles and books have appeared over the past decade which predict that the dollar would crash creating global instability. However, one of the most obvious questions to ask is: Crash against what? A currency’s value is relative. It is expressed in relation to other currencies. Euro is as weak. Renminbi is not a global currency as the US dollar and the gold standard is too restrictive for modern financial world. And, so, disappointing many forecasters, the dollar remains the king of currencies. 
 
But the deep flaws in the dollar-dependent global system cannot be wished away. Eswar Prasad, a professor at Cornell University, formerly the head of China division of the International Monetary Fund, has done work on the Indian financial sector reforms. He makes a nuanced argument that, while the dollar is flawed as a global reserve currency, it can’t be replaced and we will, therefore, have to live with it, with all its potential dangerous implications.
 
The book starts by setting the context in which the dollar has to be analysed—the global financial economy. Prasad provides a guided tour through some key analytical concepts of the international monetary system and the framework economists use to study capital flows. 
 
He also analyses how rising integration into global financial markets has affected these economies’ external balance sheets. Emerging markets are now less reliant on foreign debt and more on foreign direct investment. But these economies face new dangers—portfolio flows and asset market boom-burst cycles fuelled by those flows. This, paradoxically, explains the dollar’s strength, defying the predictions after the 2008 crisis, that the dollar would crash. 
 
With hindsight, two factors explain the continued dominance of the dollar. One, frequent global scares in financial markets, coupled with geo-political tensions, have meant a growing importance of ‘safe assets’, investments that at least protect investors’ principal and are relatively liquid (i.e., easy to trade). Two, emerging economies have a strong incentive to accumulate a massive war chest of foreign exchange reserves to insulate themselves from volatile capital flows. Indeed, the global financial crisis shattered conventional views about the level of reserves needed to protect an economy from the spill-over effects of global crises. Even countries, that had a large stockpile, found their reserves shrinking rapidly during the crisis, to protect their currencies from collapse. So, now, the new cry of policymakers in many emerging markets is: We can never have too much of reserves. 
 
Prasad asks, “Does it make sense for other countries to buy increasing amounts of US public debt, when the amount of the debt is ballooning rapidly and could threaten US fiscal solvency?” There are no answers to this. Countries have no option but to buy dollars and so they are sending more and more money into the US. Prasad argues that “foreign investors, especially the central banks of China and other emerging markets, are willing participants in an ostensible con game set up by the US.” After all, foreign investors hold about half of the outstanding US Federal government debt. 
 
In this situation, the US can theoretically act like other indebted countries—print more dollars, thus reducing the value of that debt. The US has been presumed to be doing this but, surprisingly, has escaped the consequences of such action: higher inflation. Indeed, this is what many experts predicted would happen after 2010, some even predicting hyperinflation. But inflation has been low and US is now reducing the quantitative easing without any impact on bond yields—another surprise.
 
So, what happens to the dollar’s future? Domestic inflation will not rise much and foreign investors would continue to be frustrated as they have no option other than the dollar even though they know that the dollar would weaken over the long term and they are destined to lose money. It’s an uneasy relationship, with no end in sight.

User

COMMENTS

Peter Palms

3 years ago

Indeed, it is rather obvious that the only thing which cannot have a price is money!

Monetary Realists--both of us--are like the little boy in the story of the Emperor's new clothes. Untrained in economics, we do not know what we are supposed to see; and we have escaped the indoctrination, a.k.a. education, which instructs us to see what isn't there, and assert what we do not know as true.
An example: responding to the depression of the '30s, President Roosevelt "revalued gold from $20.67 to $35 per ounce." The quote is from the estimable and learned Vronsky, from his article at this site, "A Possible 1999 Scenario." The quote is buttressed by another quote from "contemporary experts: "In an effort to rise out of the economic depression, and generate more employment, FDR on January 31, 1923, devalued the dollar by raising the price paid for gold by the U.S. Treasury." And indeed, there is virtually unanimous agreement among the cognoscenti that Roosevelt did, indeed, "raise the price of gold" by his action of 1931. May a small timid voice ask, "Did he?"
What ever happened to the meaning of words? Let us look at Roosevelt's actions through the eyes of the little boy at the Emperor's parade.
"--raising the price of gold." How does one pay a price? In money. What, specifically, was American money in 1934? Well, for foreigners, it was gold, although American citizens had had their money stolen by FDR in 1933. So our government, specifically the Treasury, was going to pay more money for gold subsequent to Roosevelt's ukase. But gold WAS money; money WAS gold! To pay more money for gold meant paying more gold for less. The dollar was .0483 ounce of gold, when the dollar was standardized at $20.67/oz. With the dollar at $35.00/oz, it was .0286 ounce. So the government announced, in what is generally regarded as a stroke of economic savvy and sophistication, that it would pay gold for gold, and that to buy .0483 of an ounce, it would pay .0286 ounces! Moreover, it announced that this was an "increase" in the price of gold! And people believed it, and still do!
But it probably never happened that way. The idea, after all, was to cheapen the paper currency. You can't cheapen gold! So Mr. Roosevelt and his henchmen would offer foreigners 35 Federal Reserve "notes" for an ounce of gold which had previously been "worth" 20.67. Wow! What a deal. Apparently, many went for it. However, should those foreigners decide to take the $35.00 from the sale of an ounce of gold, and use it to buy gold, they would end up with what they sold in the first place: an ounce of gold. No profit whatsoever. If they used the "dollars" (of what?) to buy $100 worth of gold they would have ended up with $59 worth of gold of the previous value, which they had sold so "profitably." A loss! But if they used the paper currency, not to buy gold, but to buy American products, they could buy more of them, since their prices had not changed. The producers of those products, however, would have to accept "dollars" worth only 59 cents!
What a protection for the American worker! The extent to which he was being robbed, however, was not apparent to him, because the government had, the year before, stripped him of gold ownership, so that he could not take his "dollars" to the bank and test them. And with more Americans working (albeit at a 41% discount!) the appearance of prosperity was undeniable.
What a malign institution is government! Designed to protect the rights of the people, it robs them under the guise of protection! And it does this to solve problems of its own making. Robbing the people it was created to protect, it enriched foreigners at the expense of those very same people.
Interestingly, it found this job easier because a gullible people either did not demand, or did not understand, the meaning of words; especially that most important word "dollar." Today it is a legal fiction for which we are expected to give our lives, at least to the extent of 40 hours weekly. In 1934, it did have a meaning, but no one asked, or no one cared. Neither did anyone question why anyone would use gold (money) to buy gold, or give less gold for more. Indeed, it is rather obvious that the only thing which cannot have a price is money!


Peter Palms

3 years ago

Indeed, it is rather obvious that the only thing which cannot have a price is money!

Monetary Realists--both of us--are like the little boy in the story of the Emperor's new clothes. Untrained in economics, we do not know what we are supposed to see; and we have escaped the indoctrination, a.k.a. education, which instructs us to see what isn't there, and assert what we do not know as true.
An example: responding to the depression of the '30s, President Roosevelt "revalued gold from $20.67 to $35 per ounce." The quote is from the estimable and learned Vronsky, from his article at this site, "A Possible 1999 Scenario." The quote is buttressed by another quote from "contemporary experts: "In an effort to rise out of the economic depression, and generate more employment, FDR on January 31, 1923, devalued the dollar by raising the price paid for gold by the U.S. Treasury." And indeed, there is virtually unanimous agreement among the cognoscenti that Roosevelt did, indeed, "raise the price of gold" by his action of 1931. May a small timid voice ask, "Did he?"
What ever happened to the meaning of words? Let us look at Roosevelt's actions through the eyes of the little boy at the Emperor's parade.
"--raising the price of gold." How does one pay a price? In money. What, specifically, was American money in 1934? Well, for foreigners, it was gold, although American citizens had had their money stolen by FDR in 1933. So our government, specifically the Treasury, was going to pay more money for gold subsequent to Roosevelt's ukase. But gold WAS money; money WAS gold! To pay more money for gold meant paying more gold for less. The dollar was .0483 ounce of gold, when the dollar was standardized at $20.67/oz. With the dollar at $35.00/oz, it was .0286 ounce. So the government announced, in what is generally regarded as a stroke of economic savvy and sophistication, that it would pay gold for gold, and that to buy .0483 of an ounce, it would pay .0286 ounces! Moreover, it announced that this was an "increase" in the price of gold! And people believed it, and still do!
But it probably never happened that way. The idea, after all, was to cheapen the paper currency. You can't cheapen gold! So Mr. Roosevelt and his henchmen would offer foreigners 35 Federal Reserve "notes" for an ounce of gold which had previously been "worth" 20.67. Wow! What a deal. Apparently, many went for it. However, should those foreigners decide to take the $35.00 from the sale of an ounce of gold, and use it to buy gold, they would end up with what they sold in the first place: an ounce of gold. No profit whatsoever. If they used the "dollars" (of what?) to buy $100 worth of gold they would have ended up with $59 worth of gold of the previous value, which they had sold so "profitably." A loss! But if they used the paper currency, not to buy gold, but to buy American products, they could buy more of them, since their prices had not changed. The producers of those products, however, would have to accept "dollars" worth only 59 cents!
What a protection for the American worker! The extent to which he was being robbed, however, was not apparent to him, because the government had, the year before, stripped him of gold ownership, so that he could not take his "dollars" to the bank and test them. And with more Americans working (albeit at a 41% discount!) the appearance of prosperity was undeniable.
What a malign institution is government! Designed to protect the rights of the people, it robs them under the guise of protection! And it does this to solve problems of its own making. Robbing the people it was created to protect, it enriched foreigners at the expense of those very same people.
Interestingly, it found this job easier because a gullible people either did not demand, or did not understand, the meaning of words; especially that most important word "dollar." Today it is a legal fiction for which we are expected to give our lives, at least to the extent of 40 hours weekly. In 1934, it did have a meaning, but no one asked, or no one cared. Neither did anyone question why anyone would use gold (money) to buy gold, or give less gold for more. Indeed, it is rather obvious that the only thing which cannot have a price is money!


How to Get the Best of Debt Schemes & Reduce Taxes, Still
Is it a good time to buy debt schemes? Which are the better ones? How to deal with the recent...
Premium Content
Monthly Digital Access

Subscribe

Already A Subscriber?
Login
Yearly Digital+Print Access

Subscribe

Moneylife Magazine Subscriber or MSSN member?
Login

Yearly Subscriber Login

Enter the mail id that you want to use & click on Go. We will send you a link to your email for verficiation

We are listening!

Solve the equation and enter in the Captcha field.
  Loading...
Close

To continue


Please
Sign Up or Sign In
with

Email
Close

To continue


Please
Sign Up or Sign In
with

Email

BUY NOW

The Scam
24 Year Of The Scam: The Perennial Bestseller, reads like a Thriller!
Moneylife Magazine
Fiercely independent and pro-consumer information on personal finance
Stockletters in 3 Flavours
Outstanding research that beats mutual funds year after year
MAS: Complete Online Financial Advisory
(Includes Moneylife Magazine and Lion Stockletter)