not exercised in “true spirit”
Raju owned 25% stake in the company in the year 2005 which dropped to 8.5% in 2008. Even afterbeing a minor shareholder he went ahead with the plan of acquisition without notifying the othershareholders and even the directors. According to him
“it was not required as per regulations”.
According to the provisions of law a company cannot go ahead with an acquisition of any othercompany at a price more than 60% of its own paid up share capital. But the agreed price of $1.6 bnwas way over the limit.This shows a gap in compliance to the corporate governance rules.
Reasons why the shareholders stepped back:
Reason given by the company to go ahead with the acquisition was to “de
risk” its businessmodel. But to diversify at a time when Satyam’s rivals are hoarding
cash to weather a globalslowdown seemed dubious to them.b.
Margins of Maytas Infra and Properties revealed that the margins of the combined entitywould have reduced after the deal.The letter of Ramalinga Raju to the board of directors and SEBI on the day of resignation revealedthe following:
Inflated ( non- existent) cash and bank balance of Rs. 5040 crores
Accrued Interest of Rs. 376 crores
Understated Liability of Rs. 1230 crores on account of funds arranged by Raju
Overstated Debtors position of Rs. 490 crores
For September ’08 a revenue of Rs. 2700 crores and an operating margin of Rs. 649 cror
es(24% of revenues) was shown as against actual revenue of Rs. 2112 crores and operatingmargin of Rs. 61 crores (3% of revenues). This resulted in artificial cash and bank balancesgoing up by Rs. 588 crores in Q2 alone.
13000 out of 53000 employees were fakeSome facts about Maytas:
Maytas Infrastructure’s total loans stood at Rs. 934 crores in FY ‘08
Both the companies were highly valued