Imperial Journal of Interdisciplinary Research (IJIR) Vol-3, Issue-3, 2017 ISSN: 2454-1362, http://www.onlinejournal.in

Sahara India’s Downturn; A Study on Awareness and Customer’s Perspectives

Vaishali Khandelwal Master of Business Administration

Abstract: Customers today are more concerned housing bank did not have the wherewithal to about experiencing high quality services while investigate the allegation, So it forwarded the letter investing. The expectation is not just receiving an to the SEBI, The capital market regulator. investment or financing offer from the financial institutions in form of a commodity. They rather 1. November 2010 - Securities and Exchange expect the institution to have a personality of its Board of India bars Sahara India Pariwar chief own with wider recognition and provide the and two of its companies - Sahara expected return on the financial instruments, which India Real Estate Corp (SIREC) and Sahara delivers services in an atmosphere with Housing Investment Corp (SHIC) from raising satisfaction. In the financial sector the quality of money from the public as they raised several service is turning out as an important differentiator thousand crores through optionally fully among the rivals. convertible debentures which SEBI deemed illegal. December 2010 - Sahara made appeal This case is about Sahara group which did a fraud in the Allahabad High court which ordered with their investors. Company failed to comply with SEBI not to take any action until a court order a Supreme Court order in 2012 to repay investors is passed. January 2011 - Delhi High court in the bond scheme, which the court has said was issued a warrant against Sahara India Pariwar illegal. With this regard Delhi police arrest Sahara chairman Subrata Roy and four other officials group owner Subrata Roy in march 2014 and to of the group on a complaint that it deceived appear in court over failure of two Sahara investors in a proposed housing project of companies to pay Rs 19,000 crore by way of dues Rs.25,000 crore. to be paid to investors. 2. February 2011 - Delhi High court stays proceedings against Sahara India Pariwar Keywords: Banking industry, Customer chairman Subrata Roy and four other officials satisfaction, Financial fraud, Sahara Group. of the group on a complaint that it deceived investors in a proposed housing project. October 2011 - Securities Appellate Tribunal 1. Introduction (SAT) ordered two unlisted Sahara Group companies to refund within six weeks about Sahara India Pariwar (founded in 1978) is an 17,656.53 crore with 15% interest which it had Indian conglomerate headquartered in , raised through a flotation of OFCDs. India with business interests in finance, 3. November 2011 - Sahara India Pariwar moved infrastructure & housing, media & entertainment, to Supreme Court against SAT's order and in consumer merchandise retail venture, favor of Sahara Group it stayed the SAT order, manufacturing and information technology. The and asked the two companies to refund 17,400 company had an estimated market capitalization of crores to their investors and asked the details US$25.94 billion as of March 2011. & liabilities of the companies. January 2012 - Supreme Court gives three weeks time to 1.1 Sahara Fraud Case Sahara India Pariwar to choose between either HOW IT ALL BEGUN: January 4, 2010- Roshan to give sufficient bank guarantee or attach Lal, a resident of Indore sent a note to the national properties worth the amount raised through housing bank, requesting it to look into housing OFCD's. bonds issued by two companies of the lucknow- 4. June 2012 - SEBI informed Supreme Court headquartered Sahara group, Sahara India real that real estate division of Sahara India estate corporation and Sahara housing investment Pariwar had no right to mobilise Rs.27,000 corporation. crore from investors through optionally fully Being a CA, Lal wrote in the note, he found that convertible debentures (OFCD) without the bonds, bought by a large number of investors, complying norms of Market regulator - SEBI. were not issued according to the rules. The national August 2012 - Supreme Court directs Sahara

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Imperial Journal of Interdisciplinary Research (IJIR) Vol-3, Issue-3, 2017 ISSN: 2454-1362, http://www.onlinejournal.in

India Real Estate Corporation Ltd. (SIRECL) iceberg. There is widespread speculation that the and the Sahara Housing Investment 40 million investors of the Sahara schemes were a Corporation Ltd. (SHICL) to refund over Rs. front made up to hide black money from influential 24,400 crore. donors. It is hardly any secret that Sahara made it 5. Subrata Roy was eventually arrested on 28 extremely difficult for SEBI to track down February 2014 by Uttar Pradesh police on a investors, not only by sending a plethora of Supreme Court's warrant, in a dispute with paperwork in 127 trucks for them to sift through, Market Regulator - SEBI. In a statement after but also by refusing to refund the money to SEBI in the arrest, his lawyer said Mr. Roy's 92-year- the first place. Indeed, SEBI has found that the old mother was in poor health and needed "her documents Sahara provided do not provide eldest son" by her side, and hence he failed to sufficient, verifiable information, and SEBI has appear at the court. He was granted interim heard back from less than 1 percent of the 20,000 bail by Supreme Court of India for the same on investors it contacted, with many addresses turning 26 March 2014 on condition of depositing Rs out to be invalid. 10,000 crore with the market regulator Sebi. As of August 2014, Roy was still in jail and was trying to sale some of his hotel properties (Kanteti, 2015) analyzed Sahara’s misdeeds are to enough money. considered as an eye-opener in several respects 6. September 5,2014-Sahara chief Subrata Roy about the uncertain dealings inside the corporate- asked SC for 15 more days to sell properties houses and it brings in to being the need for Appearing before a bench headed by Justice protecting the interest of several millions of TS Thakur, Roy's counsel submitted that there investors, who invested their hard earned money in have been huge protests outside the hotels after such socially irresponsible corporations. SEBI an International newspaper published story proved to be effective machinery in tackling the that Sultan of Brunei is buying the properties. case to an extent but still it has a limitation of October 1,2014- Roy was sent back to his cell regulating unlisted companies in India. The reasons in Tihar at the end of the period granted by the for such scandals are several including lack of Supreme Court for stay at the air- conditioned transparency, weak provisions, political nexus and facility in the complex to negotiate sale of his above all, ignorance of investors. In the light of overseas hotels. October 06, 2014-Subrata Roy Sahara case, it is the responsibility of the seeks restoration of special facilities in Tihar government and its various agencies to protect the jail . interests of investors and nation as well through 7. October 31, 2014-Subrata Roy shelled out Rs putting in place necessary provisions in accordance 31 lakh to use special facilities in jail. Roy was with the changing requirement of market. allowed by the Supreme Court to use the jail's conference room to negotiate sale of his hotels According to (Jagannathan, 2016) The Sahara in order to collect Rs 10,000 crore for his bail. case is getting curiouser and curiouser. Jailbird 8. And since the day of detention Subrata Roy Subrata Roy, bossman of the Sahara group, has was in the jail until he got bail on his mother’s been in Tihar for more than two years but is demise in May, 2016. showing no eagerness to come out. The Supreme Court is exasperated but has not found a way to make him pay his bail amount and get out. 2. REVIEW OF LITERATURE Politicians are quiet, despite being on bum-chum terms with Roy. Sebi has been twiddling its thumbs According to (Pande, 2014) With a population of on Roy, attending court hearing after court hearing, over 1.2 billion, more than 250 million people in without anything to show for its patience. What India live in abject poverty. Corruption at the top gives? Roy has been in jail since 4 March 2014 for and grassroots level is at an all-time high, and GDP failing to comply with a Supreme Court order of growth has slowed to 4.7 percent in 2014. The August 2012 asking him to refund over Rs 24,000 Indian economy relies significantly on the crore raised illegally by two Sahara group corporate sector, and the rising number of financial companies. With interest piling up due to non- scams has pertinent ethical implications now more compliance, Roy’s bill has shot up to over Rs than ever. The Sahara and Saradha Group scandals 36,000 crore now. And counting. After failing to represent the antithesis of all business ethics. pay up and evading the court’s orders for more than Sahara, for one, has been convicted of wrongfully 18 months, an angry Supreme Court ordered his acquiring investor money without proper arrest and said he could be released only on a bail authorization. Of course, there is the obvious issue amount of Rs 10,000 crore – half in cash, and the of misrepresenting funding activities to investors as rest by way of a bank guarantee. well as SEBI, but that is simply the tip of the

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Imperial Journal of Interdisciplinary Research (IJIR) Vol-3, Issue-3, 2017 ISSN: 2454-1362, http://www.onlinejournal.in

(Rao, 2015) Analyzed The paper studies the Sahara Primary Data – In this research, primary data India Pariwar scam. The two companies of Sahara was collected by a questionnaire and survey group naming Sahara Group Companies Sahara among people to find out the awareness level India Real Estate Corporation limited (SIRECL) about Sahara fraud case and experience of its and Sahara Housing Investment Corporation customers. (SHIC) were raising thousands of crores from the public without informing SEBI. The paper Secondary Data - Information that already discusses how these two companies could raise so existed was collected in the study from the much of money without following the prescribed authorized website of SAHARA and other rules and regulations and how did SEBI come to literature available. know about the wrongdoings of these two companies. I have also studied what action was 4.5 Target Population: taken by Supreme Court in this particular case. Opinion of general public of Udaipur from Most importantly the paper studies the corporate different age groups was taken. governance issues in the group which lead to such big scam. 4.6 Statistical tools:

4. RESEARCH METHODOLOGY Percentage method was used to analyze a few open-ended questions; some of the Questions were Research Methodology is the general research based on Likert scale, to analysis the respondent’s strategy that outlines the way in which research is opinion about PMJDY. Chi-Square technique was to be undertaken. The following methodologies applied to analyze a set of data. have been adopted for this study. 5. DATA ANALYSIS AND 4.1 Research problem INTERPRETATION

The research problem was to observe the awareness Analysis is a process of breaking a complex topic and customer’s experience regarding Sahara India or substance into smaller parts in order to gain a Fraud Case. better understanding of it. For the analysis purpose a complete questionnaires were used for analysis. 4.2 Research Objective The results of the analysis are presented below.

 To find the most important dimensions of 5.1 Demographic Profile of the study area service quality that affect customer satisfaction. 74 respondents were taken into consideration for  To analyze perceived responses of the study out of which 47% of males while 53% of customers. females were part of this survey.  To give suggestions for good quality services. Most of the respondents were students i.e. 62%.  To find out awareness among people for 24% of the total sample belonged to the self- the fraud case. employed group and 6% to the unemployed group. 5% were housewives, 2% were in agriculture and  To understand the customer’s expectations while investing. 1% was business person. 5.2 Awareness was spread among people by 4.3 Research Design these means:

This study is dependent on tangibility, reliability, Most of the respondents which is 51% became responsiveness, assurance and empathy as aware through Media advertisement, 30% through evaluated by customers on quality of service, so it friends and relatives, 11% through Agents and is a causal research design; since it reveals a cause remaining 8% through other sources. and effect relationship. 5.3 People who invested and who didn’t in 4.4 Data Collection Method Sahara India: The data collection method can be classified in two parts:

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Imperial Journal of Interdisciplinary Research (IJIR) Vol-3, Issue-3, 2017 ISSN: 2454-1362, http://www.onlinejournal.in

36% respondent or their relatives/friends invested H0 = Association between demographic factor in Sahara India while 64% didn’t invest in Sahara income and investment decision is independent. India from the total no. of People surveyed. HA=There is association between demographic 5.4 How many of the respondents or their factor income and investment decision is relatives got the expected returns? dependent.

Total no. of respondents invested in Sahara India, To check the significance of hypothesis we apply there were 18.6% people who got their expected Chi Square Test on the table given above and returns, 20.3% who didn’t get the expected returns interpret the results. If the calculated value falls and 61.1% people who don’t have any knowledge under the tabulated value then the hypothesis is about their relatives/friends got the expected return rejected and if it is more than tabulated value then or not. the hypothesis is accepted.

5.5 How many of investors know about Table 2

Sahara India’s Fraud case? Income Yes No Total The total investors among the respondents were 22 Below 5 7 12 people and 69.4% investors knew about Sahara 100000 India Fraud Case, 12.9% didn’t know about it and 1 to 3 lac 5 18 23 17.7% people didn’t have any information about 3 to 5 lac 5 7 12 their relatives/friends whether they knew or didn’t 5 to 10 lac 4 8 12 know about the Fraud Case. 10 lac & 1 2 3 above 5.6 Do People who invested in Sahara still Total 20 42 62 trust Sahara? Degree of Freedom (df) = (R-1)*(C-1) {R=no. of rows; C=no. of columns} There are 60.3% people who don’t trust Sahara, 19% people who still trust Sahara and 20.7%  (5-1)*(2-1) = 4 people who have no knowledge about their relatives/friends whether they still trust Sahara or Calculation of the expected values for the table. don’t. E11 = (R1*C1)/N 5.7 If given an opportunity, would people {N= total sum of column values} again like to invest in Sahara?  (12*20)/62  3.87 59.4% investors don’t want to do it again while 14% people were highly satisfied with Sahara’s Similarly the expected values from the remaining policies hence they again want to invest in Sahara observed values of the table were calculated. The if given an opportunity and 26.2% people don’t table given below contains the observed value, the know what would they or their relatives/friends do expected value and the square of their differences: if such situation comes before them. Table 3 5.8 Investment decisions taken by customers are dependent on their income: Observed Value Expected ((O-E)2)/E (O) Value (E) Table 1 5 3.87 0.32 5 7.4 0.77 Income Yes No 5 3.87 0.32 Below 100000 5 7 4 3.87 0.004 1 to 3 lac 5 18 1 0.96 0.0016 3 to 5 lac 5 7 7 8.12 0.15 5 to 10 lac 4 8 18 15.58 0.37 10 lac & above 1 2 7 8.12 0.15

8 8.12 0.0017 The above table shows the income wise distribution 2 2.03 0.0004 of people made investment and didn’t make investment in Sahara India from the sample size.

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Imperial Journal of Interdisciplinary Research (IJIR) Vol-3, Issue-3, 2017 ISSN: 2454-1362, http://www.onlinejournal.in

X2 = ∑((O-E)2)/E JOURNAL OF RESEARCH IN COMMERCE, IT & MANAGEMENT , 100-103.  2.0877

Hence 2.0877 is the calculated value of Chi Square. Website links: The tabulated value at the level of significance 1% and 5% are 13.3 and 9.49 respectively. www.ssrn.com/en/ Since the calculated value is less than the tabulated en.m.wikipedia.org/wiki/SAHARA www.sebi.gov.in value the hypothesis H0 is rejected. And therefore the alternative hypothesis H is accepted. www.sahara.in A www.dnaindia.com

Interpretation: It is evident from the Chi Square test that the association between demographic factor income and investment decision is dependent.

6. CONCLUSION

As a conclusion, based on this study which reveals that most of the people are aware about Sahara and its Fraud case. They also know Sahara chief Subrata Roy and have knowledge about his detention. 36% of the respondents or their relatives/friends invested in Sahara which shows that Sahara’s customers can be found out easily because its customer base was too strong, So many people used to invest in Sahara even from low income families also which indicates that Sahara targeted low income group as well as high income group. Sahara was having diversified products for various income groups of the market. But many of the customers didn’t get their expected returns and the study reveals that the fraud case decreased its popularity and people started losing their faith in Sahara hence most of the customers don’t want to invest again in the Sahara. And Sahara’s customers remained dissatisfied and hurt with its involvement in the fraud case. And investment decisions taken by any investor highly dependent on his income as the results showed by chi square test.

7. REFERENCES

[1] Jagannathan, R. (2016, March 31). Why Is Subrata Roy Not Eager To Get Out Of Jail? The Sahara Case Gets Curiouser. New delhi, India.

[2] Kanteti, D. V. (2015). Corporate Social Irresponsibility towards Investors- A Case Analysis of Sahara Group. Indian Journal of Research , 198-199.

[3] Pande, A. (2014). Corporate fraud in India- case studies of Sahara and Saradha. seven pillars institute .

[4] Rao, N. (2015). A CASE STUDY OF SAHARA INDIA PARIWAR SCANDAL . INTERNATIONAL

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