Monday, December 29, 2008

L'affaire Satyam

I have a short commentary in Forbes.com

It's becoming increasingly likely that Ramalinga Raju and his family will lose control in Satyam. If they could sell their stakes at a reasonable price, they would have cash to fund their infrastructure ventures. Any transfer of control in Satyam would be truly ironical: thanks to their hoards of cash, Indian IT firms were, until recently, viewed as potential acquirers rather than acquisition targets. It would be quite an anti-thesis to the India Shining story.

6 comments:

Sumeet said...

At the same time, I think this is healthy sign, from the point of view of markets.

For me, this in a sense also underscores the efficiency and decision making ability of the Indian markets.

To that extent, I think all Indian firms would be more attentive to their management structure going forward.

What more needs to be public is the investment banker who was advising the firms, if any.

Anonymous said...

Dear Prof

Just to look at the whole issue from a different perspective if the same takeover was announced exactly an year back how would have the FIIs reacted? What are the chances that the management would have been praised to the sky for adding shareholder value by diversifying into the hottest sector of the time given the appreciation of rupee and pressures in IT sector profitability. Would like to hear your take...thnks

surething said...

(I have also posted a slightly different version of this comment at Forbes but not sure if it will appear):

There are several errors and omissions in your Forbes article.

1. The author refers to 'two businesses owned by the family of its promoter'. One of these businesses Maytas Infra is a Publicly Listed Company and not owned by anybody's family.

2. The author says Ramalinga Raju is promoter-CEO. He is not the CEO of Satyam and probably never was.

3. World Bank did not ban Satyam on data theft charges. In fact, Satyam was absolved of any such charges in the official statement released in their India web site.

4. While you have conveniently mentioned the Raju name several times, I felt you (or is it the Forbes legal team?) are conveniently 'coy' about revealing the names of the HBS professor and Silicon Valley Enterpreneur and other distinguished academics who were munching roasted cashews and signing on the dotted line that fateful board meeting.

T T Ram Mohan said...

Surething,

1. I do mention the family stakes in the two businesses later in the piece.
2. I should have said promoter- chairman. Raju is Executive chairman and hence numero uno.

3. Several papers reported the theft charges.

4. Names of independent directors were left out only because there was word limit on the article.

-TTR

Kanan Jaswal said...

One of the so-called independent directors, Krishna Paleppu, teaches corporate governance at the Harvard Business School and he has famously written many cases on the subject. I suggest he now prepared a case study on the Satyam affair - he could give it the title "While the independent directors slept (or munched roasted cashew nuts - thank you, Surething!).

Incidentally, should the name of the company not be changed to "Asatyam"?

Anonymous said...

Dear Prof.,

Satyam has been engaging in unethical practices since 1999. Any due diligence performed by an independent entity can easily uncover the facts. These improper practices have clearly benefited the promoters and their friends at the expense of share-holders and employees.

This is the definition of "fraud".

Yet, the educated class in India persist in debating the finer points of governance. The issue is integrity and integrity cannot be replaced by corporate governance standards.