Thank You, Mr Raju

19 December 2008

The aborted Maytas acquisitions were probably Satyam's way of fulfilling its promise 'to find creative and productive ways to delight its stakeholders'. Still, we must thank Mr. Raju for making sure that promoters will now think twice before even considering such brazen attempts to loot minority shareholders. By Shivshanker Verma

On Wednesday morning, as usual I was checking how the US markets fared overnight. I don't normally pay much attention to Indian ADR prices, but that day was different. Satyam's ADR had fallen by almost half in just one trading session. That doesn't happen unless a company goes bankrupt or something like that. But, Satyam is supposedly a cash rich company that continues to enjoy healthy cash flows despite the downturn in business outlook. Then again, it is difficult to know which company is bankrupt these days. So I went straight to Satyam's website and read the incredible announcement of its proposed acquisition of Maytas Properties and Maytas Infra for $1.3 billion.

The press release did not mention, not even as a footnote, that Satyam's promoters own the privately-held Maytas Properties and hold a 36-per cent stake in Maytas Infra, a listed company. Instead the release said, "the two acquisitions pave the way for accelerated growth in our core IT business in additional geographies and market segments such as transportation, energy and several infrastructure sectors'.

Ok, I get it. The best way for Indian IT companies to grow in any vertical is to acquire companies which are actually engaged in that business, or so Satyam believes. In other words, if an IT company wants to grow its service offering in the telecom space, just go out and buy a real telephone company.

S Ramadorai of TCS, Chris Gopalakrishnan of Infosys and Azim Premji of Wipro, please note... you are way behind the curve; this is the way forward for the Indian IT industry!

Now don't say Satyam didn't disclose this strategy to its shareholders in advance. Satyam's latest annual report has a section on corporate governance (page 38) that says, "The Company's goal is to find creative and productive ways to delight its stakeholders."  Maybe, not many shareholders who read the report earlier this year would have thought the company was quite serious about what it said.

But they must admit that it is impossible to be more 'creative and productive' than by transferring $1.3 billion of shareholder wealth to promoters who owns just 8.61 per cent of the company. Brilliant! This should be made a mandatory case study in all business schools!