The Satyam – Maytas flip flop
Wonder what’s up with Ramalinga Raju? Wonder what was running through his mind when he decided to buy into the infrastructure and real estate firm, Maytas run by his sons. Satyam is a unique company in a way that the promoter group holds less than 10% stake and private investors hold a majority stake in the company (most of them FIIs). So, it was even more baffling to see the decision taken by the promoters to shift the company’s focus into an altogether different field from its current IT Services.
Maybe Raju rode his luck or was absolutely sure that his decision wouldnt be questioned by the shareholders. Its a victory for the minority shareholders. Under severe pressure by shareholders across the board, the decision to buy into Maytas had to be withdrawn. It takes years to build up trust and a certain image in the market and with one silly move, Ramalinga Raju has poured water on all the hardwork. A 30% hammering of the stock (on NSE) in one day will have shown Raju who the boss is and he better not take any such decisions in haste the next time.
Satyam announced the acquisition of the privately held Maytas Properties for $1.3 billion and increasing its stake in Maytas Infra to 51 per cent for $300 million. However, the company had to eat humble pie and withdrew its proposal due to strong opposition from shareholders.
The hasty retreat has dealt a severe blow to Satyam’s credibility and made it the laughing stock of the investor fraternity. Analysts said the deal was unethical as it aimed to bail out firms owned by promoter and chairman Ramalinga Raju’s sons. According to them, the company grossly overvalued the real estate and infrastructure firms, especially at a time when the two sectors were not in a good shape.
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