Geography Reference
In-Depth Information
The next sign of trouble came on 16 December 2008 when the markets forced Raju to
reverse a sudden move by Satyam to take over Maytas. That evening (India time), after
local stock markets closed, Satyam announced it was spending $1.6 bn surplus cash to buy
out two privately held Maytas real estate and construction companies, Maytas Properties
for $1.3bn and 51 per cent of Maytas Infra for $300m. The market reaction was swift -
Satyam lost 55 per cent of its value on the New York stock market and there were strong
attacks from investors and analysts. By the end of the day (US time), Satyam had cancelled
the deal. Raju claimed implausibly that the Maytas companies would have helped 'de-risk'
Satyam against a downturn in the software business, though that made little sense when
construction and real estate businesses were harder hit than information technology out-
sourcing companies that were conserving cash to help weather the global economic slow-
down. Rarely had a company been brought into line so rapidly and publicly - and it might
not have happened if Satyam had not been quoted in the US because in India it might have
merely caused some headlines and then been shuffled out of the news.
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A few weeks later, Raju resigned and admitted in a letter to the company's board that
he had been inflating Satyam's profits for several years. Cash and bank balances and oth-
er favourable figures had been overstated, resulting in artificial balances of Rs 5.88bn in
the three months ending the previous September. His attempt to merge Maytas into Satyam
'was the last attempt to fill the flctitious assets with real ones', aimed at filling the fraudu-
lent holes in Satyam's balance sheet with genuine Maytas assets. 'It was,' wrote Raju, 'like
riding a tiger, not knowing how to get off without being eaten'.
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In July 2010, however,
he retracted his statement while appealing for bail.
Satyam was rescued with the initiative led by the Indian government and is now part
of the Mahindra group, capitalizing on the software skills that Raju had squandered in his
family's race for Maytas's infrastructure projects. Both companies, and the Raju family, be-
came the subject of extended inquiries by the finance ministry's Enforcement Directorate,
which handles foreign exchange and money laundering cases, and the CBI. Raju was in jail
from January 2009 till November 2011 when he was released on bail.
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In October 2013, the Enforcement Directorate filed charges against Raju and 47 other
charges included selling and pledging of Satyam shares at in?ated prices, receiving bonus
shares under employee stock option schemes, and dividends on the inflated shares through
inter-connected transactions involving 327 front companies 'which were used to layer the
proceeds of crime'.
GMR, GVK and Lanco
