Satyam: where is the defalcated cash?
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‘Funds could have been funnelled out by the management’
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All the investigating agencies must cobble together their efforts to resurrect the ‘brand Indian IT’ and ‘brand Hyderabad’.
— FILE PHOTO
A WORRIED LOT: Employees at Satyam Infocity facility in Hyderabad.
In the process of extricating the fraud-hit Satyam Computer Services from the red, numerous agencies, including the Government, appear to be separating the company and the management group — to be precise the promoters — from the yoke. It is important to appreciate the efforts of all those pitching in to insulate the company from legal wrangles.
But if, at some point in time, the investigating agencies finally crack the case and detect where the defalcated cash went, will the fortunes come back to Satyam is at least a two-billion-dollar question. What happens to the hard-earned cash pumped into the company’s shares by retail and small investors that evaporated in no time with the tumbling of share prices?
What was Rs. 266 on the day when Satyam came up with the idea of acquiring Maytas Properties for $1.3 billion and a controlling stake in Maytas Infra for a consideration of $0.3 billion nosedived to just around Rs. 20 in three weeks, eroding the market capitalisation by about Rs. 15,000 crore.
Shares rise
Thanks to the interest shown by L&T, Satyam shares surged on Friday to a little over Rs. 38. Large investors such as Aberdeen Asset Management Company, Lazard Asset Management and others exited by selling their shares in the open market soon after the “monumental admission” by B. Ramalinga Raju before stepping down as the chairman. The promoter group’s share melted down consequent upon their sale by the financial institutions with which they were pledged due to margin call pressure. These institutions realised a sum of Rs. 400-450 crore.
With Friday’s buy, L&T became the biggest shareholder in the IT behemoth having 12.04 per cent stake, said G. Jayaraman, Company Secretary of Satyam. Life Insurance Corporation of India has about 4.5 per cent stake.
The arrest of Mr. Raju and others impacted the markets so much that the company had to be taken out of the list of benchmark entities that decide the sensitive index of the Bombay Stock Exchange and the National Stock Exchange, as it was dragging them down to unreasonable levels.
Tasks
In an informal chat, Union Minister of State for Commerce Jairam Ramesh said that those who had been so far deified turned out to be men with feet of clay. “I believe that there are many (of this ilk),” he observed. The tasks cut out for those in the interplay with the Satyam’s revival are clear: Putting a new full-fledged and operational board of directors in place; choosing a new management; and re-establishing the credibility of the company in the eyes of the customers.
The shareholders value would be a consequence of the revival of the company, for there was nothing wrong with the company intrinsically. After all, the shareholders interest could not be seen in isolation. All the agencies must cobble together their efforts to resurrect the ‘brand Indian IT’ and ‘brand Hyderabad’.
The theory of falsification of records, as admitted by Mr. Raju, has seriously come under cloud, while the argument that the funds could have been funnelled out by the management is gaining ground by the day. The argument of prosecutor Ajay Kumar in the Hyderabad Court dealing with the murky deals of Mr. Raju too pointed to the same thing. What happened to the wads of currency notes that should have been lying with the banks? Have they been buried in the murky land deals?
Was the company operating on just three per cent margins with its 185 Fortune 500 clients such as GE, Nestle, Cigna, and State Farm, numerous ‘encumbrance-free’ campuses at multiple locations across the globe, and thousands of associates?
The revelations about the multi-angled racket percolate down to documents of land deals that are emerging out of the shelves of the searched premises of Mr. Raju and his family members in the inquiries by the CID of the Andhra Pradesh Police. As the probes have just scraped the surface, there appear to be more scams in store. Once the Securities and Exchange Board of India and the Serious Fraud Investigation Office get to question the concerned, many more skeletons will tumble from the cupboard.
FD receipts
The charge that Mr. Raju and his family members purchased huge tracts of land trigger a question on what was the source of income for the Byrraju brothers other than Satyam Computer. Bank after bank — HDFC, BNP Paribas and lately Bank of Baroda — submitted to the court that they did not have any fixed deposits of Satyam with them and that the fixed deposit receipts were all fake.
A Mumbai-based analyst said the investigation must be conducted concurrently by all the competent authorities effectively and quickly and unearth the roots of the scam beyond doubts sans any loose ends. This investigation should become a textbook case in India’s corporate history and also send out a serious warning to all fraudsters.
The investigations must expose the source of funds for the purchase of land across the country, and also verify if the web was knitted world- wide and get back the entire sum to the company that was built by the talented engineers and restore the value created by the shareholders.
A. SAYE SEKHAR
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