MUMBAI // Subrata Roy once threw lavish parties and socialised with a crowd of Bollywood stars and cricketers. The tycoon was often photographed in the company of world leaders, Indian politicians and business moguls.
But he has spent most this year languishing in the Tihar jail in New Delhi, where he remains today, in what marks a dramatic fall from grace for the founder and chairman of the multibillion dollar conglomerate Sahara India Pariwar.
Sahara, which is based in Lucknow in north India, has interests in sectors ranging from property to media. It owns the Grosvenor House Hotel in London and the Plaza Hotel in New York. Sahara sponsored the Indian cricket team for a decade and it owns a stake in a Formula One racing team.
Mr Roy built up his empire as Sahara grew its core business of collecting deposits from millions of poor and rural Indians with limited or no access to formal banking services.
The group is the largest private-sector employer in India, with more than one million employees and agents. It is worth 680 billion rupees (Dh39.1bn) and has more than 36,600 acres of land, according to the company.
Its future hangs in the balance, however, as it remains unclear when Mr Roy might be released from prison and as regulatory and transparency issues plague Sahara.
Earlier this month, the supreme court rejected Mr Roy’s pleas for release and with the next hearing set for next month, he will be seeing in the new year in prison.
Mr Roy, 66, was jailed in March after he failed to turn up to a hearing amid a supreme court battle with the Securities and Exchange Board of India (Sebi), the capital markets regulator. The group had allegedly failed to repay billions of dollars to investors after bonds Sahara sold to them were later ruled to be illegal, according to the court.
There has been widespread doubt over Sahara’s business, notoriously shrouded in secrecy, as financial regulators have been closing in on the group. There is much speculation that Sahara is actually hiding black money. This is something that Mr Roy has vehemently denied.
"[Mr] Roy and his business conglomerate have acquired a larger-than-life image where the dividing line between myth and reality disappears," writes Tamal Bandyopadhyay in his book on the group titled Sahara — The Untold Story.
“The biggest mystery is his source of money. There have been allegations of money laundering by Sahara, but no investigation has been able to prove it. ”
Before he was jailed, Mr Roy claimed to have repaid most of the money to investors for the outlawed bonds.
The court order, however, stated that documents provided by Sahara “falsify their refund theory and cast serious doubts about the existence of the so-called investors. All the fact-finding authorities have opined that the majority of investors do not exist”.
It said that market integrity was critical for India’s economic growth and for maintaining investors’ confidence.
“Market abuse is a serious financial crime that undermines the very financial structure of this country and will make imbalance in wealth between haves and have-nots,” it added.
For his part, Mr Roy has denied all wrongdoing, and in a note on Sahara’s website the group says that “rich man’s Sebi does not understand, recognise poor investors”.
Mr Roy said that he did not attend the supreme court hearing because he was with his critically ill mother.
He released a note at the time explaining his absence and saying that he couldn’t “handle this level of agony and humiliation”.
The court in March said that Mr Roy and two Sahara directors who were also jailed would be granted interim bail on paying 50bn rupees in cash and another 50bn rupees as a bank guarantee towards its liabilities.
This month, the supreme court refused to accept postdated cheques that the group handed over.
Sahara has proposed to raise the money by securing new mortgages and loans on its foreign hotel assets. But the supreme court on December 17 said that such money raised overseas would only be allowed to come into India following clearance of the funds by the Reserve Bank of India.
It also rejected his appeal to be granted a two-month parole. It has demanded further information from the group on the proposed loan. The next hearing is scheduled to take place on January 9.
Earlier this year, Mr Roy had tried to sell off his trophy hotels while he was in jail. He was moved to a makeshift office in the prison for two months, where he had internet and a phone connection. But no deals transpired.
Sahara snapped up London’s Grosvenor House for £470 million (Dh 2,685.7m) in 2010 and picked up New York’s Plaza Hotel a couple of years later for $570m.
It also owns the Dream Hotel in New York. Mr Bandyopadhyay describes Mr Roy as trying to portray himself as a fiercely patriotic character and a Robin Hood figure in a country where only about a third of the adult population has access to the formal banking system.
Narendra Modi’s government is striving to bring more banking services to poor and rural Indians. With Sahara, poor Indians are allowed to set aside as little as one rupee a day.
There is a cult-like element to the group, Mr Bandyopadhyay explains. Mr Roy and other senior executives are greeted by employees who bow to them and touch their feet.
Mr Roy refers to himself as the “managing worker and chairman” of the “world’s largest family”. He also calls himself Saharasri, which translates to Mr Sahara.
In an interview with Mr Roy, he explained to Mr Bandyopadhyay the appeal of associating with celebrities: “Right from the beginning, I felt that sports people and Bollywood actors are achievers.”
His home is Sahara Shaher in Lucknow, which boasts a helipad, cricket stadium, a golf course, and an auditorium. He built up popularity by sponsoring the Pune Warriors team in the Indian Premier League cricket tournament and stepping in to sponsor the cash-strapped Indian hockey team, as well as supporting families of the police officers who were killed in the terrorist attack on Mumbai in November 2008. He also gathered together 120,000 people last year in the outskirts of Lucknow to break the world record for the greatest number of people in one place singing a national anthem.
“Barring finance, the Sahara group has not excelled in any other business,” says Mr Bandyopadhyay.
Sahara, which was founded in 1978, also launched an airline, Air Sahara, originally known a Sahara Airlines. The plan was for the carrier to rival Air India. But Sahara sold the loss-making venture to Jet Airways in 2007 for 14.5bn rupees. The service was renamed JetLite and then later JetKonnect.
Mr Roy famously started out his career selling snacks with a Lambretta scooter as the only asset to his name.
“In rural Uttar Pradesh, [he] is a messiah of the poor who helped them develop the habit of saving,” Mr Bandyopadhyay writes. “Roy appears a master of mass psychology. Roy clearly knows how to build trust and credibility among the poor, not so much the regulators. Roy revels in pomp, splendour and loyalty.
“The glitz and glamour attract the poor; they remain glued to Roy, who straddles the world of glamour and the other India that lives in Gorakhpur, Varanasi and Lucknow with consummate ease. He is an entrepreneur who doesn’t like to be regulated. ”
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