Reality Check India

Satyam daddy buys sons companies for $1.6B

Posted in Uncategorized by realitycheck on December 16, 2008

First, an update on the grand daddy of all scams. The Congress Party led UPA government’s underselling of a national property by Rs 55,000 Cr is starting to attract eyeballs.  Some “entrepreneurs” have become dollar billionaires in just a 6-9 months. 

In the Rajya Sabha today, V Maithreyan of the AIADMK raised the issue of the scam. He was supported by CPM and BJP.  Some correctly described the scam using the following phrases.  “The greatest ever scam” (Maithreyan),  “dubious companies which had nothing to do with telecom” (Tapan Kumar Sen), “scam has broken all records (Prakash Javedekar), “Very serious issue” (Sharad Yadav).

Nothing is going to expose Indias underbelly like this scam.

The media must strain every muscle to shield some people in the Congress. The Telecom minister has clearly said that both Prime  Minister Dr Manmohan Singh and former Finance Minister and current Home Minister Mr P. Chidambaram were in the loop on all details.  We have not heard a single word from these two gentlemen. As things stand – they are in on this !

Now back to the main post – about another “entrepreneur”

Expressbuzz ( PTI File Photo)

Source : Expressbuzz ( PTI File Photo)

Today, another White Tiger  proved yet again why Indians are the ultimate entrepreneurs.

 India’s fourth largest IT bellwether Satyam Computer Services late Tuesday drew a barrage of criticism after it announced a decision to spend $1.6 billion (Rs.79.2 billion) to buy real estate and infrastructure firms run by the two sons of its founder-chairman B Ramalinga Raju.

..

Earlier, in a notification to the stock exchanges, Satyam said it would spend $1.3 billion (Rs.64.35 billion) to buy a 100 percent stake in real estate firm Maytas Properties and $300 million (Rs.14.85 billion) for a 51 percent stake in Maytas Infra.

 

The Hyderabad-based Maytas Properties is run by Rama Raju, the younger son of the Satyam founder, and Maytas Infrastructure by Teja Raju, the elder son.

Source : Expressbuzz

I am 80% certain that Satyam (NYSE: SAY)  does not require shareholder approval to buy the two Maytas companies.  We dont work like that here.

A side note (consider the following quote)  :

“The buyout will de-risk the core business by bootstrapping a new business vertical in infrastructure. This market segment can mitigate the risks attributed to developed markets and traditional verticals that are likely to be impacted by the recessionary economy,” Ramalinga Raju said in a statement later.

Dear God ! Is this how IT high tech honchos talk ?

A clean-room-capitalist defence

Maytas companies are said to have a land bank of 6800 acres (thats right). Their fathers’ firm Satyam has cash balances amounting to USD 1.2 Billion.  Both Satyam and the two Maytas companies are private companies. If one wants to buy the other, then why is Realitycheck’s heart burning ? Is RC a closet socialist ?  If this is a bad move, both Satyam and Maytas will crash and burn. Either way it is the prerogative of the two private parties. There is no scam here – move on.

What is wrong with the above  ? Any guesses ?

Answer in the comments section.

—–

Trivia : Maytas is Satyam spelled backwards.

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19 Responses

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  1. Raj said, on December 16, 2008 at 6:56 pm

    I could think of a couple..

    1. Satyam is not a private company..not sure if there is a real board that makes decisions or is filled with *Raju people.
    2. May be the valuation for the land is too high when compared to the market price.
    3. Obviously a wrong move when corporate credit is tight and real estate is going bust.
    4. May be there is some tax loop hole scam.

  2. Barbarindian said, on December 17, 2008 at 2:25 am

    Satyam stock price took a huge hit though – while the sector and comparable ADRs stayed flat.

  3. realitycheck said, on December 17, 2008 at 2:47 am

    The deal is off.

    This is not just a huge embarassment to the Satyam board but it brings out in full view what is wrong with India’s brush with capitalism.

    Tax holidays for IT only
    ————————-
    Satyam claims they want to use their 5800 Cr cash to diversify out of software. What they do not tell you is that this money includes tax savings due to the STPI tax holidays. Any outgo from this business must be subject to retrospective tax. But even this simple anomaly is too complicated for us to understand.

    The danger of LAND BANKS
    ————————-
    Satyam claims that DLF has 10,000 acre “land bank” and Maytas has a 6800 acre land bank. Does’nt anybody see the danger of these private companies just “HOLDING” land as speculative instruments. Today the common man (actually even the IT man) cannot afford to buy a 20×30 plot. These are the new zamindars fed and nourished by the SEZ policy.

  4. realitycheck said, on December 17, 2008 at 3:28 am

    Just catching up on morning reading.

    From Bloomberg,
    >> “Satyam’s a public listed company and you just don’t do things like going out and buying another listed company which has family links,” Susquehanna’s Friedman said. “It’s not great for corporate governance.” >>

    The entire world is jealous only because Mr Raju is an “entrepreneur”

    Down with everyone who does not understand Indian Economy.

    ——–

    Another news story against “entrepreneurs” http://www.dnaindia.com/report.asp?newsid=1214633

    This is what Mr Vadalamani has to say about Land Bank Pvt Ltd

    >> Srinivas Vadlamani, CFO: Look at the landbank for Maytas: It’s 6,800 acres of prime land in and around Hyderabad, Chennai, Nagpur, Vizag. There is a potential to build 245m square feet. DLF has a landbank of 10,000 acres. They have potential to build 750m square feet. Now look at the valuations: Despite the price crash, DLF is valued at Rs 60,000 crore. Now this particular company being acquired at Rs 6,000 crore.
    >>

    All this talk about ‘land banks’ is sickening. We are looking to hire someone to shake things up. At the moment, non-maoists are preferable.

  5. Barbarindian said, on December 17, 2008 at 6:30 am

    Neat scheme to convert public/private goods to personal goods. The private part is the only reason the deal fell through though.

  6. Soham Das said, on December 19, 2008 at 8:37 am

    Are you supporting, Satyam or trashing it?

    If you are supporting it, then I am sure it will do you some good to read about the management [or rather mismanagement] of Satyam.

    Google: Satyam Sued 1billion

  7. roger said, on December 19, 2008 at 2:46 pm

    It is bloody daylight robbery – a 10% shareholder like Ram Nanga Raju siphoning off 1.0 B USD as a Christmas gift to his nalayak sons.

    Though the TV commetators are not using the F word (Fraud) – it beats robbing banks for a living.

    The only thing against this “wonderful” idea were the FII shareholders who said they will book Raju for fraud in the US (remember ADR’s) – since he did not relish a 20 year jail sentence for fraud – it was reversed in double quick time.

    As usual the thoreticians were sleeping Palepu etc. The Indian funds were not bothered as it was business as usual for them. For this is what Indian promoters are meant to do.

    So after Upaid, getting thrown out of World bank contracts, and now a last ditch bid to siphon out money, all it can be said Well done Satyam – chak de India!!

    Maybe we can give Raju some lifetime achievement award.

    roger

  8. jadugar said, on December 23, 2008 at 5:46 pm

    Who will catch such boardroom terrorists (Raju)?

    j

  9. v said, on December 24, 2008 at 9:11 am

    If cats are blind ., rats xpose anything.

  10. jadugar said, on December 30, 2008 at 3:49 pm

    It seems the “independent” board was protecting the minority shareholder Raju with 4%. Good job and well done.

    It seems a BEST pickpocket has more finesse than our Raju – so in case he gets kicked out from Satyam he can always cruise BEST buses.

    j

  11. […] a comment » So the real reason behind the outrageous Maytas acquisition bid is now […]

  12. confused said, on January 7, 2009 at 1:18 pm

    cud sumbody brief as to wat exactly shook satyam???dh reason behin dis collosal wreck. how is dh world-bank withdrawal influncin dis state??? kidly reply.

  13. roger said, on January 8, 2009 at 6:52 am

    Now that the Peocock award to Raju has been withdrawn Cartoon Network News can give the “Cock Award” t Raju buggering his employees and shareholders.

    As for Foolish Institutions Investors are concerned they deserve it having joined the Tom Tom TV gang. Before the FII onslaught indian investors holding in Indian companies have come down to 2%, sickened no doubt by the ongoing sleaze and corruption of indian public limited companies.

    Astute Indian investors have known for long that Indian companies abhor cash in their books. It can always be used for promoter side deals by making book entries in the (im) balance sheet. After every bear market the siphoned cash can be written off and appropriate adjustment to book value can be made.

    Last week JaiL Prakash also siphoned off 700 crores in the process of mergers of unlisted companies.

    Any bells ringing in our collective thick skulls yet?

    roger

    roger

  14. rahul said, on April 1, 2009 at 8:13 am

    hi i want know about scam of satyam

  15. […] 17 2008 : Satyam Daddy buys sons companies for $1.6B (2G ref) First, an update on the grand daddy of all scams. The Congress Party led UPA government’s […]

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