On 30th Sep 2009, company name Sahara Prime City (SPC) which was the part of Sahara group of companies, submitted its DRHP (Draft Red Herring Prospectus) to SEBI for issuing IPO (Initial Public Offering), so as to raise the fund from public. While analysing the DRHP, SEBI realised that other two companies of Sahara Group, i.e. SIRECL (Sahara India Real Estate Corporation Ltd.) and SHICL (Sahara Housing Investment Corporation Ltd.) had raised funds in inappropriate/illegal manner through OFCD (Optionally Fully Convertible Debentures).
If any company is issuing the OFCD to less than 50 people/investors then it is compulsory for the company to take the permission from ROC or Registrar of Companies. And if the company is issuing OFCD to 50 or more than 50 people than it should take permission from SEBI.
When SEBI started the investigation, it realised that the two companies of Sahara Group had raised the OFCD of Rs 24,000 crore from 2 to 2.5 crore investors, without taking permission from SEBI.
At that time, Dr. K. M. Abraham was the Board Member of SEBI and was the investigator of Sahara Case. When he was verifying about the details of investors of OFCD, he found that many of investors in Sahara are fictitious, and others do not have any relation with Sahara Group.
In Aug 2012, Supreme Court (after an appeal made by Sahara Group) found SIRECL and SHICL guilty and ordered them to submit the money to SEBI that they have collected from investors with 15% interest under 3 months and also submit all details of investors to the SEBI so that SEBI could return the money to the investors.
Most of investors details provided were incomplete and unrealistic, and hence the matter was of Money Laundering.
Out of 2.5 crore investors, only 4600 investors came forward to claim their money. Supreme Court found that the matter is more than just fictitious and froze the bank accounts of Sahara and sealed their properties. Finally, on 28th Feb 2014, Sahara Supremo Subroto Roy and two other directors of Sahara were arrested.
OFCD (Optionally Fully Convertible Debentures. Debenture) is a Debt instrument, using which company borrows money from people and in return gives them interest, with an option to convert their OFCD to Equity and become the share-holders of company.
IPO or Initial Public Offering is the process through which any company offers its shares (Part of ownership) to public (people) for very first time, so as to generate the funds. IPO is the process through which any company gets listed on Stock Market.
DRHP or Draft Red Herring Prospectus is the Biodata of the company and it contains all information of the company. It is not a confidential document and SEBI uploads it on its official website. If any company wants to get listed on Stock Exchange so as to raise funds then it is compulsory for the company to take the permission from SEBI (Security Exchange Board of India) which is Capital market regulator in India. To issue the permission, company submits the DRHP to the SEBI. DRHP contains all the information of the company like Financial Information, Objectives, Promoters and Management details, past performance, Capital Structure, Issue Information etc.