Maytas deal makes more sense now


I went on a vacation for 2 weeks at the fag end of 2008. I went believing that the most dreaded year of my adult life has come to an end. I also went with the  hope that I will have my job when I come back. One of my assumption is turning out to be false and the other luckily is true. As it is turning out, 2009 could be the dreaded year and I still have my job.

Thought it is good to be back, it is not a happy feeling to write or type any of the words. There is anger, frustration and pain as I type this. Most importantly I am sick of the ‘Breaking News’. But, life is too short for all these things. I decided to be happy and see the brighter side of it.

I am referring to the Satyam episode. I am refraining from using words like scam or scandal because those words are already being used by the TV channels, eminent personalities like Mohandas Pai and the rest of India Inc.

I have blogged about the Maytas deal and why it did not make any sense. It never did until today. Now it makes perfect sense. Credit should be given to Ramalinga Raju for being adventurous.

Maytas Properties and Maytas Infra was valued at $1.6 billion. That is the exact amount of money which was missing from Satyam’s books. The admitted amount so far is close to 7000 crore rupees. The inflation was done largely by financial gymnastics.

Since there is no cash on Satyam’s books and since Maytas would not mind being acquired for free it all made perfect sense. The story would have ended happily if it wasn’t for the investors. Investors reacted sharply to the deal. Satyam pulled out. Look what the investors got now.

What would have happened if Satyam went ahead with the deal? Sure the investors would be pissed off. Some of the clients might  have stopped outsourcing to Satyam. But that would have been minor when compared to what is happening now. I am not sure about other ramifications but nothing could have been this catastrophic.

Since that did not happen Raju has no choice but to write a confession letter.

I am not supporting Raju neither am I ignorant to the repercussions of this episode. I completely understand that this is a criminal offence. Having said that, something of this magnitude has happened in the past, is happening now and will happen in the future.

Countries like US has learned from the mistakes and are experimenting with tougher regulations. I suggest the same thing for India too. The hysteria is more a cultural thing. Just ask any US guy and he would say that this is all too common.

According to me, Ramalinga Raju has committed two mistakes and have done one good thing.

Two mistakes :

  1. By inflating the profits over many years. This is all too obvious.
  2. By pulling out of the Maytas deal : It would have been a better ending to the story has Satyam went ahead and bought Maytas – ignoring investors. That would have been a different story.

One good thing :

  1. Coming out and admitting the fraud in public instead of resorting to some other gymnastics. Not a whole lot of people realize the importance of this. The whole media is acting like it has discovered something in its sting operations. But please give yourself and everyone else a break.

India Inc should stop blaming Satyam and start looking into their books.

Suggestion to Raju : When you are riding a tiger you should get down and run for your life. “Run Raju Run

PS : India Inc’s image will not be tarnished because of this.

  1. Tallada Kishore says

    Good insights. The way you look at things are unique and different. You has shown a new insight to the happening. I like these points.
    1. Fate of the investors. They could have handled it in a intelligent way.
    2. 2 mistakes
    3. 1 Good thing
    Ramalinga Raju build this castle from scratch. It is not his ancestral property. In Andhra, parents teach RamalingaRaju success story to their children. He contributed to well being of society namely 108 service. Now many states are emulating this service. He may not bounce back with these shackles on hands but his disciples will rise big. His ideas, thoughts and vision are investments for his business. It is every father’s intention to see his sons in great positions. This is the prime motive behind and where Raju committed mistake.

    1. M.Sriram says

      Hi kishore,
      You are appreciating a guy who is world class cheat , who is nothing but a bundle of lies, by the way 108 EMRI land belongs to govenment , it was also cover up for exemption of tax and getting money in dollars from aborad, friends pl understand the motive of this raju , he is faction ,nepotist,and on a pure in human.
      I am sure some saneness will privail beofe u right he has done one good thing. pl also teach some good things to children, i know he is a product of sytem for which , if we support these cheat it is nothing but we are cheating ourself and the country we born in.

  2. Sriram Vadlamani says

    @Prasanna : What happened in Satyam’s case is some financial gymanstics which inflated the profits and became snowball of 5000 crores of cash. This cash was never there.

    How can this be IT specific? In fact it is not IT specific. If something should be in danger it is the whole India Inc. But again this is blowing it out of proportion.

    What we have discovered is just $2bn. Compare this with a Enron, Worldcom or a Madoff? Those scams dwarf Satyam.

    The memory of the investors and general public is volatile. People will talk about it and forget it.

    We just have to wait for another breaking news for us to get this Satyam saga behind.

  3. Prasanna says


    The what-if-that-happened point of view of your post makes more sense as you said to the whole story and I completely go with you over the opinions. One thing I wish to add is what if the scam or scandal does not stop with Satyam and more and more of India Inc has been inflating the profits. Do you still think the credibility of the Indian IT industry and the dreams of the true and honest entrepreneurs is not at stake?

  4. Gopinath Mavinkurve says

    Hi Sriram, nice thoughtful post. “India Inc should stop blaming Satyam and start looking into their books” That’s right. Hopefully there are no other contenders for the best fiction book for 2009!
    Read more in my post on the same subject:

  5. amolpatil2k says

    Everywhere two factors hold: Business ego and demand supply.

    Those in the Raju camp would be gloating about how much they could skim given that business liability is limited especially in services and that prosecution is never swift or even fair. This is business ego.

    Demand supply is simply the rule that all demand must meet all supply. In other words, the statistical distribution of how ethical the supply is would match the statistical distribution of how ethical the demand is.

    So the ethics of Infosys created over demand which the non ethics of Satyam milked.

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