Satyam – another angle: Benefit an acquirer??

Posted: January 9, 2009 in Uncategorized
Tags: , , ,

The mind does not stop working on possible reasons why Ramalinga Raju made this big confession. I am not going to believe that suddenly he got a call on conscience. That is utter nonsense.

Yes, there was the angle of DSP Merril Lynch going to SEBI to let SEBI know that they are withdrawing from the mandate due to specific reasons. But that still prompts the question – why did DSP Merril Lynch wake up suddenly? They have been associated with the larger Satyam group including with Raju in his individual capacity, for long now. And if they are so close, could they have not known the wrong doings for so long?

So I keep fishing for ‘yet another angle’ 🙂

Me and my investigative mind.. 🙂

In criminal investigation style, we start with “who could have the motivation” for conjuring this up?

Consider the scenario:

  • Satyam was already looking for merger / acquirer opportunities,
  • Several must have already checked them out (many names were coming in the press, in the days preceding),
  • Say, one of them got serious and was working towards a closure, and doing due diligence at that stage,
  • And at which point, the cracks were visible,
  • Even so, the acquirer was interested, but at a far lower valuation,
  • Which if it had gone through, there would have been huge uproar from the markets, as to why Satyam was sold at such a low valuation,
  • Without reducing valuation, the acquired would have not been interested,
  • The deal needed to happen, as Satyam cash flows were precarious,
  • Raju and family were owning very small equity now,
  • If Raju went beserk in the manner that he did, the stock would collapse,
  • Nobody would touch it,
  • The core assets, be it customers, employees, real estate owned, would not disappear overnight; they had nowhere to go that easily,
  • And at those low valuations, the interested acquirer picks up the company,
  • And passes back to Raju and family, off-record, some benefit, for having orchestrated the event,
  • Also leaving enough room to put out money into political patrons, who would ensure that after all the uproar, not much damage is caused to Raju and family.


To illustrate with numbers, for better understanding:

  • Say, Satyam valued itself earlier at 100,
  • On due diligence, acquirer figured that Satyam was not worth more than 60,
  • Deal could not happen as market would not accept Satyam value of 60,
  • Raju writes letter and lights the bomb,
  • Now the acquirer can potentially pick  up Satyam at 5,
  • In the madness, Satyam value might have gone down to 40 from 60,
  • That still gives a neat discount of 35 to the acquirer,
  • He shares 10 with Raju and family, leaves 10 for political helpers, and keeps the rest for himself,
  • Not bad, eh??!

Yes.. the investigative mind working overtime…!


  1. Sumit Banerjee says:

    That is quite a lot of thought sir!! There is also a line of thought that the gap in the funds is a creation.

    Just imagine that the money was really there. It was quitely removed to finance other interests, say infrastructure, real estate etc. But that market suddenly got hit very badly during 2008 and went for a toss. It still is in quite a mess.

    So the wealth that was invested there had depreciated and could not be ploughed back in adequate amounts to fund Satyam’s regular working capital requirements. Thus you have a cash deficit and the whole plot just unhinges into a disaster.

    Had it not been so, the appreciation in wealth from the quiet investment would/could have been neatly removed as if it was just not there…………

    Seems to me that it is a case of wrong projection and just plain complacence……..

    PS: Have you ever heard of an organization by the name of Maytas doing exceptionally well (other than being in the news for non-infrastructure/realty issues of late)
    One family originating from Bhimavaram owns 6500 acres of land in AP reportedly.

  2. […] is buying the Satyam shares? When I wrote yesterday about the Satyam saga being potentially motivated by an acquirer, there was a reaction that who would want to buy a tainted Satyam? In fact a friend asked me in so […]

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