Sahara’s learning curve with Pilot Baba

They were the early 1970s. Godmen were finding different ways to fire people’s imagination. Pilot Baba was one of them. He tried to establish himself as a godman of substance by undertaking a ‘samadhi’ — burying himself for days together in the ground and then emerging alive and unscathed after many days of quiet breath-less subterranean existence.

Once he went around Lucknow, soliciting media support for his grand effort. Ferried religiously by a devotee on his Lambretta scooter all over the capital of Uttar Pradesh, which was then really a tiny city, Pilot Baba criss-crossed the town many times. The results of his ‘samadhi’ then may have been indifferent, but he was always forthcoming and enthusiastic in introducing his ardent scooter driver devotee – Subrata Roy, who ran a chit fund company called Sahara. I don’t remember how they came together, but visually they made a strange pair: a young moustachioed guy in a safari suit going around with a pillion rider in a white dhoti and flowing beard.

That was so long ago. Since then Roy and his Sahara have made rapid strides. His fortunes looked up dramatically during the days when Vir Bahadur Singh was the state’s irrigation minister and later its chief minister. During this phase, colossal investment was made in flood control by raising the heights of embankments along the rivers to prevent flooding during the rainy season. In many places along the river, there were no embankments, but it still did not stop the engineers and contractors from making these ‘ghost dams’ higher and higher every year. Expectedly, there were disasters every year that required relief and rehabilitation efforts, which also meant colossal funds going into the coffers of petty bureaucrats and contractors. Disaster capitalism was teasingly beckoning the new breed of businessmen.

The Sahara chit fund company stepped in to fulfil the felt need of this growing class of people who were looking to park their savings at a rate of interest higher than the public sector banks. Better still, it collected the money from the home. Many major politicians also invested their funds with Sahara — a fact the chit fund company displayed with great pride in full-page advertisements when the Income Tax department tried to nail it many years ago.  The IT department backed off, causing grief to the officer who asked tough questions. 

Rumours and gossip have been providing answers to tough questions about the company’s humongous rise in the last 30 years or so. Are the depositors of the chit fund real? Also, do the small depositors ever get their money back? These questions became the concern of the Reserve Bank of India after the Congress-led UPA came to power and P Chidambaram became the finance minister in 2004. Before the regulators woke up to ways to regulate residuary non-banking finance companies, the latter had already become very big. Legitimacy building efforts had resulted in Sahara being the sponsor of the Indian cricket team. Large-scale housing projects, too, had been granted by friendly state governments as in UP.

Many major politicians also invested their funds with Sahara — a fact the chit fund company displayed with great pride in full-page advertisements when the Income Tax department tried to nail him many years ago

 And then there were the amazing marriage ceremonies that Roy organized for his two sons, where it seemed the who’s who of the country had converged on Lucknow. Film stars like Amitabh Bachchan, Aishwarya Rai and many other politicians received guests at the really big, fat wedding reception. Yet, for some reasons, Roy and his pop nationalist ways could not endear him to the Congress leadership.

The Securities and Exchange Board of India (SEBI) questioned the Optionally Fully Convertible Debentures (OFCD) that some of Sahara’s companies had floated to raise funds. The Supreme Court upheld the SEBI position about demanding to know the identity of the investors who had bought these debentures. The SC thought that many of these investors were dubious and wanted Rs 24,500 crore to be returned within a specified period of time.

Sahara is waging a legal battle to save its funds, but this period of attrition with the government has seen his company pick up London’s famed Grosvenor House Hotel and another property in Manhattan, New York.

Roy has rubbished the SEBI claims by issuing high-value full-page advertisements in newspapers that have the impact of lowering the resolve of many media outfits to do follow-ups. He is using every trick to buy time to ensure that he gets a better deal from an easy-to-manipulate system. Not too difficult for someone who knows how Pilot Baba can come back from the dead.