Posts Tagged ‘satyam’

The highly successful, almost cult-like Bollywood film, “Deewar” has the hero playing a very serious, remorseful and strong character. Part of what he became as an adult was the consequence of what he experiences as a child, when his father is condemned as as thief and a traitor. But what hurts the most is the permanent tattoo that some of his father’s critics inscribe on his hand, and which reads “Mera Baap Chor Hai” (transation: “My father is a thief”).
The stigma of this inscription on his hand never goes, and which remains one of the reasons why almost right through his life, he does not even smile, and is always lost in thought, staring into space. It’s a tough life to live with a stigma of this kind.
I was thinking about all this, when I read about the Raju brothers spending the night with 40 other inmates, sleeping on the floor, and getting a toothbrush and toothpaste from the jail staff.
How the mighty fall?
They came to give themselves in, in their Mercedes.
They probably live in mansions, fly first class, have a horde of servants at their beck and call, have a police station named after their company, in short, have all riches that one needs. And good for a few generations too, I am sure.
And then what happens? Greed takes over. You want more. And you are willing to give up your values (assuming you had some to begin with!), you are willing to cross the line over. To make those quick bucks. To become wealthier. To amass even more fortunes.
That is what the Rajus did. That is what many others have done before them. The Ketan Parekhs, the Harshad Mehtas, the C R Bhansalis, etc. etc.
They believe they have enough money to get out of any soup. And perhaps they do have it. But the few nights of agony that they experience, treated as rank criminals, and their names bandied about as the scum of the earth, is a stigma that lasts a lifetime.
Maybe, it’s only a matter of time – a few days / weeks / months perhaps, before the Rajus go scot free. They would depend on the short public memory, and the power of their money, to manage this Houdini act.
But even after that, as their children or grandchildren go to school, or walk the street, there is always a chance that someone shouts behind them, “Hey, son of a thief..” or “There goes the grandchild of a crook”. That will never go away.
I am sure Ketan Parekh and family will experience that, I am sure the late Harshad Mehta’s family might be facing that, and the Rajus will also have that to worry about.
About that permanent inscription on their bodies, which reads that “they were thieves”.
That’s a hard price to pay. Especially when you did not have to!
A petty thief stakes his all, to do his make-or-break large theft, and he has little to lose, even if he is caught. On the other hand, the Rajus had enough to last a few lifetimes. Why did they have to do what they did? Not even the permanent tattoo removers will remove the stigma all over their souls, now.. !

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The story of Ramalinga Raju’s admission to big time fraud generated massive reactions all across. Especially from within the industry. Some downright angry, others more studied, some sarcastic, some a little more generous.

We heard from the likes of Kumarmangalam Birla, Anand Mahindra, K. V. Kamath, Deepak Parekh, Narayam Murthy, scores of eminent financial analysts.

But conspicuous by their silence were India’s largest private sector head honchos, the Ambani brothers!! Was it a case of “those who live in glass houses cannot throw stones”?? When the biggest of corporate scams has occured, when the markets are getting tanked, investor confidence dips to an all time low, ordinarily, as India’s largest private sector corporations, would it have not merited a statement from them?

Interestingly, there is another analysis of the behaviour of the markets, on January 7th, after the Satyam news broke.

On that day, 13 Tata companies did better than the index, while 6 did worse.

All 3 Mukesh Ambani companies and all 6 Anil Ambani companies did worse than the index.

Real estate companies Unitech and DLF also did worse than the index.

Is there a message that the market was giving? In regards to corporate governance, on the day when that was the biggest reason for the freefall? Maybe, just maybe.. ?!

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 many words, on Twitter, and I had responded that it could potentially even be Reliance-ADAG group, who have been working towards setting up their own software company!

Well, the same thought is pursued by the media, once again a day after I speculated about the same! The Times of India writes today, that the Satyam shares might be purchased by a Mumbai based corporate house having interests in telecom, financial services, power and infrastructure and entertainment.

That description covers how many corporate houses?? Exactly ONE!!

And that corporate house has potentially all the characteristics to have stage managed this entire show!!

Think about it… !

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.

A SERIOUS WIN-WIN PROPOSITION, WHAT SAY??

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…!

🙂

Okay, so “satyam” was trending on Twitter, and news channels and newspapers have been filled a plenty with all persepctives on the Satyam story.

Amongst other things, the two most asked questions have been:

– Why did Ramalinga Raju confess to his crimes, at this time?

– How did PWC allow such nonsense to be going on for so many years, even as they were the auditors who signed off the balance sheets?

So here is a contrarian thought – at least I have not read this view point so far.

What if PWC was not really wrong? What if they actually did the verification of the cash and bank accounts before confirming the balances?

What if the said balances were TAKEN OUT recently??

Rs. 5000+ crores is a large enough booty for any fraudster to make a major conspiracy for. Take out the money, invest in property, expect the property to appreciate even more than the kind of money that Satyam could make in it’s core business?

If he did that, PWC did not know about it, till the last annual balance sheet that they might haev signed off. And in which case, they were on the right path till that point. If Raju siphoned off this case more recently, this big confession, and dragging down of an asset where he had only 3.14% equity left – that too pledged out and borrowed against – was an easy way out to explain all his sordid crimes. And with a kitty like Rs. 5000 crores, plus the cash he would have stashed away earlier, there was enough money to keep prolonging the legal case, till it falls off public memory.

And in between, if he needs to go and spend a few nights in jail, it may not exactly be a bad price to pay.. Think about it…

On the other hand, as far as the Indian stock exchange is concerned, its jinxed out at this time.

First the global economic crisis hit. And the markets fell.

Once investors started realizing that India was not that bad off, they started picking up the stocks again. And the market was making small recovery.

Then the Mumbai terrorist strike happened. And the house came crashing down again.

Once again after about a month, the markets were gradually making their way up.

When Ramalinga Raju, the other “terrorist” struck!! And the free fall happened once more..

As I said.. markets are jinxed! 😦