My 2 Cents

Sunday, January 25, 2009

The Saga Unfolds - A New Twist

The saga unfurls. No thriller is more twist ridden than the Satyam saga. Today's reports suggest that there is large scale diversion of funds into real estate for Maytas projects. So this implies that their there is no over reporting of profits. Or in other words Satyam did make profits and these profits where correctly reported but illegally diverted. This also implies that the cash was available and was siphoned out for Raju's sons' projects. And this is perfectly illegal.
For a enlightened mind this is actually good news. How ?
If Satyam had been reporting non existent profits then well.. the profits are non existent. And if this has been going on for 7 year & with an accumulated non existent cash in excess of Rs 7200 crores the company would have run aground choked of liquidity given their high fixed cost in terms of wages , staff expenses & rentals. But did did not happen because CASH WAS THERE to meet all these running expenses. The surpluses were skimmed away outside the company & funnelled into real estate. Clearly a case of blood being thicker than Satyam.

So whats the good news ? Not just good news but sweet news is the cash is in the form of REAL estate ( note the capitalisation of "real" ). Its in a different form a better form but outside Satyam. So what ? Isn't this better than reporting non existent profits to such astronomic levels ? Such large amounts cannot be transacted in cash. Hence the bank trail is easy to trace and establish the crime and the fruit of the crime - the property. Once proven transfer the title to Satyam and its books can be made healthy. Isn't news from heaven ?

Still with me. Good.

Where were we ? Well Maytas.

Maytas reportedly has Rs 70,000 crores worth projects in the pipe line. Being a privately held Maytas did not have to explain this to SEBI or the share holders. So surplus cash from Satyam was channeled into Maytas & Maytas went on a buying binge. The big question is why the sons are free and so merry. Will they not be busy tampering evidence & clearing up trails ? Should not the authorities clamp down on the whole group freezing all bank accounts and seizing all the documents of Maytas Projects & Maytas Infra.

The powers that be have been very slow to act right from the word go. A hand for them is not ruled out.

If the above inference is true then the Raju's offences are less damaging to Satyam and themselves. There is an outside chance they may get away with a slap on the wrist. Imagine the fund trails lead to the property and properties transferred to Satyam at book value then Satyam's finances are shored up and Satyam is sure out of the woods and any kind of uncertainty. This is not just good news but great news.







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