Tag Archives: Securities and Exchange Board of India

Sahara freeze order gets Sebi Rs 52 crore in cash, investments: report


New Delhi: Market regulator Securities and Exchange Board of India (Sebi) has been able to get hold of cash and investments totalling about Rs. 52 crore and details of more than 450 acres of land so far through its attachment orders against Sahara group entities.

In the high-profile case involving refund of over Rs. 24,000 crore to the bondholders of two Sahara companies, Sebi had passed orders for attachment of various properties and freezing of accounts in February after the entities failed to deposit the entire money.

Cash totalling over Rs. 23 crore, received from various banks pursuant to these orders, has been invested in a term deposit for now, while investments worth about Rs. 28 crore in mutual funds and demat accounts have also been frozen, sources said.

After passing its attachment orders, Sebi informed all the banks, depositories, mutual funds and NBFCs, among others, about the matter and also requested RBI to direct the chiefs of the banks to transfer the money of Sahara firms to a designated Sebi account.

Sebi had also approached the Collectors of as many as 600 districts to request them not to permit the concerned Sahara entities and persons from any sale or transfer of properties attached by the regulator.

As a result, the District Collectors and Revenue Officers from various parts of the country have provided Sebi details of more than 450 acres of land belonging to Saharas, sources added.

The regulator has already asked the Supreme Court to allow it to appoint an Officer of Special Duty and other officers to deal with the objections and claims relating to the property to be sold and for conducting the sale of the property to garner funds for refunding the investors’ money.

Saharas have so far deposited Rs. 5,120 crore with Sebi towards the refund and claims that this amount is more than sufficient to meet the outstanding liabilities towards its bondholders as the group has already paid close to Rs. 20,000 crore directly to the investors.

The money was raised by Sahara Housing Investment Corporation Ltd and Sahara India Real Estate Corp Ltd from about 3 crore investors through issuance of certain bonds.

However, these claims have been disputed by Sebi before the Supreme Court, which is expected to resume hearing the case next month. In the meantime, Sebi has begun the process for refund of the money to the genuine investors after verifying their credentials.

A pilot study conducted by Sebi for ascertaining the genuineness of investor documents submitted by Sahara, however, found that close to 99 per cent of the bondholders were untraceable, said the sources.

Under this programme, Sebi sent out redemption notices inviting claims to more than 21,000 bondholders but it received less than 300 claims, which are currently under examination.

While more than 7000 notices returned undelivered, there was no response in respect of over 13,000 notices. Sebi will refer these case to Sahara for further verification, the sources said.

Last month, Sebi began inviting claims from Sahara bondholders in a prescribed format and has said it would directly transfer the refund money to the bank accounts of the genuine investors and they can not get the money without having a bank account.

The Supreme Court last month told Sebi to begin refunding the money to genuine investors from Rs. 5,120 crore deposited with it so far, while the matter would be heard further by the apex court on July 17.

As per the court orders, Saharas would also have to bear the costs incurred by Sebi in the entire refund process. Sebi is already believed to have incurred huge costs, including initial expenses of about Rs. 56 crore for putting in place storage, scanning and repayment systems, for the humongous task of facilitating these refunds and Saharas have to clear these bills.

The regulator had contracted Stock Holding Corporation of India (SHCIL) for work relating to storage, digitisation and scanning of investor documents and for creation of a database. This contract alone was worth Rs. 25.97 crore.

Besides, another contract of Rs. 29.88 crore was given to UTI Infrastructure Technology and Services for the work relating to redemption related activities in this case.

The Supreme Court has also appointed a retired judge to oversee the matter at a monthly remuneration of Rs. 5 lakh in addition to travelling, accommodation and other expenses, all of which are borne by Sebi and recoverable from Sahara.

After Sahara firms were told by the Supreme Court to hand over the investor documents to Sebi, the group sent 127 trucks with more than 31,000 cartons of papers to the regulator’s headquarters in Mumbai.

However, these contained only 75 per cent of the entire documents required to be submitted. Finding it impossible to store them at any of its offices, Sebi decided to keep them at a warehouse of SHCIL Projects  Ltd, a subsidiary of SHCIL.


Market blow: India FII flows to dry as Fed eyes end to easy money


by Jun 20, 2013

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New York: The Federal Reserve will keep its monetary ‘printing press’ running a while longer, though Chairman Ben Bernanke said the central bank could start winding down its $85 billion-a-month bond-buying program later this year and end it altogether by mid-2014. That sent a chill through the US markets.

The emerging markets, including India, which have also been invigorated by the fuel of the Fed’s easy-money policies, will not take the news happily when markets open on Thursday.

US markets sold off on the news with the Dow Jones industrial average plunging 206 points, or 1.35 percent on Wednesday to close at 15,112 points.

The Fed’s plan for unwinding its bond-buying program is based on optimistic new economic forecasts for next year, including a projection that the jobless rate, which was 7.6 percent in May, will fall to 6.5 percent by end-2014.


Representational Image. Reuters

Although this is not a formal announcement, Bernanke for the first time offered a timeline for winding down the bond purchases. But tapering the program will be dependent on positive economic data, Bernanke stressed during a press conference following the Fed’s two-day policy meeting.

“Policy is in no way predetermined,” Bernanke said.

He said the wind-down could begin “later this year” if growth picks up as the Fed projects, unemployment comes down, and inflation moves closer to the central bank’s 2 percent target.

Using a car as an analogy, Bernanke said the Fed’s tightening policies will be akin to “letting up on the gas pedal as the car picks up speed.”

“The fundamentals look a little better to us,” Bernanke said. “In particular, the housing sector, which has been a drag on growth since the crisis, is now obviously a support to growth.”

Stock markets have soared for three years under Bernanke’s program and analysts are expecting a sell-off and market volatility when the Fed announces a firm date for scaling back the purchases. The Fed chief was given the “Helicopter Ben” moniker during the financial crisis when he suggested dropping money from a helicopter to fight deflation.

The US central bank has added over $3 trillion of monetary stimulus to the economy and over $1 trillion of bailout loans to financial firms since the 2008 financial crisis. This was done to prevent a widespread banking crash and help the wider economy. Part of the stock market rebound from the March 2009 lows is based on market fundamentals, but a big chunk is courtesy Helicopter Ben.

Liquidity party over for India

The Fed’s $85 billion-a-month bond-buying program, known as quantitative easing, was aimed at spurring the US economy, but for years now it has also had the effect of sending waves of inflows into high-yielding emerging markets like India. Market watchers say that an end to US monetary stimulus could lead to portfolio outflows, pushing the rupee lower and, in turn, delaying any rate cuts from the Reserve Bank of India.

“Stocks that have been overbought might see sale. Investors that are using leverage, mainly hedge funds, may also want to reduce their holdings because of the carrying cost of debt combined with the expected decline of stock prices,” Seth Freeman, CEO and chief investment officer at San Francisco-based EM Capital Management LLC, told Firstpost.

“Indian small and mid-cap stocks are going to be the most affected by the Fed’s decision to the extent of foreign investment in those stocks. It’s not going to be risk-off but risk-reduced. US investors looking at India are likely to become more selective. They will look more closely at India’s larger companies,” said Freeman, who advises foreign investors and funds on implementing investments in India. He has managed an US listed India-dedicated mutual fund that owned both large and mid-cap companies.

Foreign institutional investors have been sellers of Indian shares for six consecutive sessions, totalling Rs 3,431 crore as per exchange and regulatory data.

Freeman said the money locked into exchange-traded funds may not trade out and that might be a backstop. A slew of exchange traded funds focused on India flourished after the 2008 financial crisis as US fund managers looked East for higher yields and Americans looked for exposure to the Indian markets.