Tuesday, December 16, 2008

Satyam Maytas Deal - Audaciously Appalling


It rarely surprises me to see promoters pulling a fast one on minority shareholders but the Satyam proposed buying out of Maytas has really surprised me for the sheer audacity of the promoters.

I will not run into the finer mechanics of the deal as there is enough information on the web but the sheer magnitude of money ( US$ 1.3 Billion) being siphoned out to bailout Ramlinga Raju’s son is appalling.

The market has always been sceptical about Mr Raju’s ethical standards. Remember the 500 crore Indiaworld deal that was done during the dotcom boom. The market was abuzz with rumours on how a significant chunk of the money went back to Mr Raju and his family and got siphoned out of the Satyam balance sheet.

No wonder Satyam always trails Infosys and TCS in terms of valuation. This would be a test case to see how far institutional investors push the promoters and ensure that the deal is reversed.

Incidentally “MAYTAS” is the reverse of “SATYAM”.

10 comments:

Anonymous said...

This is a classic example of financial greed. I think Raju lost his mind. May be he thought he would take a chance (get away with it) and see what happens and the market reacted down very well(I just saw the deal retraction posted on satyam website). Shame on you Raju.

Ninad Kunder said...

Hi Anon

Yeah he has retracted from the deal but he market has given a thumbs down for the intent of the promotors.

Cheers

Ninad

Rohit Chauhan said...

hi ninad
actually promoters of infy etc are a minority. most of the indian promoters consider companies their personal fiefdoms ..that too with miniscule holdings.
actually corporate governance is horrible in india. satyam got hit because it is listed in nyse ..if it was lised in india alone ..not much would have happened.

this problems is also not limited to indian promoters ..MNCs are even worse the way they have short changed the shareholders

regards
rohit

Ninad Kunder said...

Hi Rohit

I completely agree that corporate governance levels in India have a long way to go and I also think we need to see more of investor activism in this country.

Whenever I start looking at a compayy, my starting point is to look at the ethical standards that the promotors display. This is the most critical variable. You could have a great business and a great company but a unethical promotor will easily siphon everything out.

The Satyam promotors dont have a great reputation and I have seen that over the years and steered clear of the stock. What amused me this time was the sheer audacity of the move of maybe the stupidity of it.

Cheers

Ninad

Anonymous said...

hmmm but as one goes through the fine print it seems that no law of the land has been voilated and also the board consist of some of the best names, also this was the same set of management which made this company so sucessful so if they had bad itentions why wait till now and why would international bodies recoginize them for corporate governance, i think there is more to this than what is being splashed in press / media which seems to be only one side of the story

Anonymous said...

hmmm but as one goes through the fine print it seems that no law of the land has been voilated and also the board consist of some of the best names, also this was the same set of management which made this company so sucessful so if they had bad itentions why wait till now and why would international bodies recoginize them for corporate governance, i think there is more to this than what is being splashed in press / media which seems to be only one side of the story

Ninad Kunder said...

Hi Anon

The law might not have been broken but it has been mauled in spirit.

The manaegment has a historical track record on shady transactions and they tend to pull up one every 2-3 years.

Also I dont see whats wrong in things being splashed in the press or a few institutional investors getting together and replacing the management. Clearly no law has been broken. Its works out both ways.

Cheers

Ninad

Kulwinder said...

Hi Anon,

I am sharing some facts, i repeat facts only to share with you why Satyam still is a fundamentally sound company:

1. Satyam has Presence across the Globe (20 Industries ,65 Countries) more diverse than Wipro & INFY. This does happen by accident. This spread helps Satyam in tough economic conditions. Did you know outside India in Asia Pac Satyam revenue are more than any of the Top 3 Indian IT services firm. De-risked Geographic revenue distribution 21% Europe, 17% Asia Pac, 62% America’s. Best present to leverage emerging markets.

2. Satyam has Mature Practices DWBI & ERP. HCL had to spend over 0.5 Bn to get the ERP skills which we already have. they just save $ 0.5 Bn

3. Revenues & Net Income have Grown Five-fold over last 5 years. This by sheer hard work by 50,000 people. Not by accident

4. FY08 was the 5th successive year of >35% Growth in Net Income. Show’s how they have got profits year after year.

5. 32% revenue coming from New & Emerging vertical : Satyam has diversified and expanded is industry depth.

6. Deepest Fortune 500 client penetration 185, Total 690 clients. Clients continue to support Satyam in spite of the issues that have surfaced in last 10 days. Company has as many clients as Infosys and strong fundamentals then why worry?

7. Company has the largest cash reserve to revenue ratio in IT industry as a result of company employees under management direction … why question it now?

8. Client delight index is a 4.5 out of 5, client retention is 98% – clients are an asset – do not loose sight of the fact and do not slight Satyam and management for just one aberration – this is an organization and not just a script on the BSE/ NYSE

Anonymous said...

hi kulwinder
you seem to missing the point and seem to be publishing the same comment in multiple blogs.

the problem is not the business, but the management. you can be a smart and good businessman but care a hoot about the minority shareholders which is poor corporate governance. fortunately for a change the market has decided to kick the management in its B$$$

are you being paid to publish a standard comment on all blogs ?

rev said...

heh...the cats outta the bag!!!