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SEBI-Sahara OFCD case: Optionally fully-convertible debentures- Meaning explained
1. What is Debenture?
2. Difference between Bonds and Debentures?
3. Types of Debentures
4. What is Optionally fully-convertible debentures (OFCD)?
5. 2008-09: The game begins
6. 2011: SEBI Order
7. 2012: Supreme Court hearing
8. Order of Supreme Court
9. Government’s response
What is Debenture?
From the earlier Debt + Equity article, you know there are two (legit) ways to arrange money for starting or expanding a company
Type meaning Example
Debt: Borrow money from someone. Offer him interest rate and guarantee to repay the principal after xyz date.
Ex: Bank loans
Borrowing from friends, relatives, moneylenders
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~23 million people, mostly from villages and small towns subscribed to this scheme. They invested ~24,000 crores rupees in these OFCDs of SAHARA.

SEBI : You (SAHARA) have violated rules. If OFCDs are issued then whole process should be completed within 10 working days, but here you continue collecting money from people for more than two years!
SAHARA: This fund-raising was in the form of a private placement. I.e. we offered the schemes only to our select clients, this wasn’t meant a “Public Offer”! So what’s your problem?
SEBI: Dude if this is private placement, then maximum only 50 people can invest money in it.
Here ~23 million people have parked their hard earned cash! Hell the number of investors in this case, is even more than the total number of people investing in the conventional stock-exchanges of India!
India’s biggest IPO till date was of Coal India worth Rs.15000+ crores, and you’ve made 24,000 crores out of these OFCDs! It is my responsibility to protect the investors’ in Capital market.
Hence, By the powers given to me under SEBI Act, I hereby order you to stop collecting money and refund all the money to those investors with 15% interest rate.
This is not right!
Well, if you’re unhappy with my order you can go to the Securities Appellate Tribunal (SAT)
Pleads before SAT.
SEBI is right. You refund money to those people.

We are unconvinced with your logic that OFCD schemes don’t
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