Investors prefer to deal in cash, says Sahara

MUMBAI: The Sahara group on Wednesday said that average daily cash transactions at each of its 4,700-plus offices across India is about Rs 2.5 lakh, which amounts to over Rs 1,000 crore in aggregate. Most of this is done with the group's investors with no bank account, and where the transaction amount is not over Rs 19,000. It said the group's cash transactions with its unbanked investors were construed and twisted in a manner to present a picture that the group has only been raising money in cash.

"The fact is that most of our investors are small. In OFCDs (optionally fully convertible debentures), our average investment amount is Rs 8,000, and contributions from around 98% of our investors are below Rs 19,000. It starts at as low as Rs 500," a Sahara spokesman said. "Mostly these people do not go to bank and banks also do not reach them. So these investors deposit their money in cash and essentially want to take back in cash," the spokesperson said. Independent international surveys have said that only about 50% of India's 1.3 billion population have access to banking services, the spokesman added.

The spokesperson said that the group has infrastructure throughout the country with more than 4,700 offices and lakhs of workers. It is into agency work and provides infrastructure services to housing finance, mutual benefit and residuary non-banking services. It also issued OFCDs in three companies from 2001. It is involved in a credit co-operative society and in non-financial activities like consumer products, etc.

Since all these businesses involve cash transactions with small and marginal investors, as a practice, all its businesses collects cash at its local office and then distribute the same to its investors rather than transferring the cash to its head office and then again re-transferring the same to its branches. This way, the risk of carrying cash is minimized since, in the past, some cash was looted and several employees had even lost their lives. It also became a cost-effective method of handling cash, the spokesman said. "This also ensured timely payment of money to investors."

It also blamed Sebi about not understanding the nature of its cash transaction.

In an apparent dig at the market regulator, Sahara said that in the last 17 months, Sebi could pay only Rs 70 lakh out of Rs 5,120 crore that the group had deposited with the regulator for onward payment to its investors under a court directive. "Sebi totally ignored Hon'ble Court's order and has not initiated even one verification out of the three crore investors in last 17 months. In the last few months, it has also been totally avoiding to report the valuation of our assets submitted to them. We are very happy the Hon'ble Court has ordered them this time to come out with the valuation report," the spokesman said.