A year into collapse, Satyam set to get a new identity

Hyderabad, Dec. 16

It is exactly one year to this day when Satyam Computer Services, then in top-4 IT services company league, took the corporate world by surprise by announcing its controversial plan to buy the two Maytas companies – Maytas Infra and Mytas Properties – for Rs 8,000 crore.

The excuse was to diversify into the infrastructure business considered to be the next big thing.

The decision to acquire the promoter's family business enraged the investor community. For, it would have eroded all the Rs 8,000-crore cash pile the IT major had accumulated.

Incensed, they grilled Mr B. Ramalinga Raju, the then Chairman, and Mr Vadlamani Srinivas, then Chief Financial Officer, at the investor call towards the evening.

Mr Raju had to recall the move the following day, raising curtains on the murkiest corporate dramas in independent India.

The decision did not put off the crisis. What followed, in fact, stunned the country.

The Central Bureau of Investigations, which had put the size of the fraud at about Rs 7,000 crore initially, had said that the size was much bigger at Rs 12,000 crore in the supplementary charge-sheet filed in November 2009.

This, however, doesn't include the losses suffered by the shareholders.

The value of the share, once darling blue chip of investors, fell like nine pins, eroding thousands of crores of investor money overnight and putting into question the fate of employees and clients. After putting up a brave face for 20 days, Mr Raju wrote a letter to the Bombay Stock Exchange on January 7, 2009, admitting to the fraud that put the Government, corporates and investors in absolute disbelief and shock. Mr Raju had claimed that he did this to be in the big league and that the plan to acquire the Maytas twins was to salvage the problem.

The allegations against Mr Raju were too many. Siphoning off funds, off-loading promoter shares, diversion of funds, inflation of employee numbers, inserting fictitious invoices to inflate revenues and forgery.

But for the timely intervention by the Union Government, the company would have gone into oblivion. Superseding the 10-member board, the Government named a six-member board, comprising experts in banking, corporate governance, IT and financial services.

With their hands strengthened by the Government and the Company Law Board, the new board got into action by talking to clients and employees in order to restore confidence. After achieving this, they proceeded to select a suitor for the company. IBM, L&T, Cognizant, iGATE and B K Modi's Spice group were among those who showed interest. But it was the Mahindras that emerged as a dark horse by clinching the deal on April 13 at Rs 58 a share or about Rs 2,900 crore to get 51 per cent stake in the company.

Though analysts were divided over the Satyam buy, the Tech Mahindra management, led by Mr Anand Mahindra, the group's Vice-Chairman, toured extensively all over the world, assuring the employees and clients about the continuity in business processes, as the company changed its name to Mahindra Satyam.

The staff number, which stood at 53,000 at September 30, 2008 (the last time the erstwhile management published the numbers), had fallen to about 28,000, with the new management getting rid of “redundancies”.

In 2010, Satyam is likely to lose its identity too. The Mahindras have dropped enough hints that the company would be merged into Tech Mahindra.

Source : http://www.blonnet.com/2009/12/17/stories/2009121752300400.htm