Let’s…’Discover Telangana’ !

- C Ramachandriah

The decision by Satyam Computers to acquire Maytas Properties and Maytas Infra had to be called off thanks to protests by shareholders. The speed with which Satyam tried to divert investors’ money to the two firms managed by the family of the promoter, B Ramalinga Raju, may have been prompted by the needs of the Hyderabad Metro Rail Project (HMRP), which was bagged by Maytas.

That the Satyam chief had only 8.5% share in Satyam and yet wanted to divert about 90% of the company’s Rs 6,240 crore of surplus liquid cash to a company run by his family speaks volumes for corporate governance. Satyam has so far not revealed the name of the firm that valued Maytas Properties at Rs 6,400 crore. Reports indicated that there are about 6,800 acres of lands which have been valued at Rs 1 crore per acre. Where are these lands? Why not disclose the details of their location and extent? One view is that the lands that Maytas is likely to get for several projects in the pipeline (but have not yet been conclusively awarded) are also included in this estimate. Since the leading auditing firms are all known to have denied involvement in valuation of Maytas Properties, it appears to be a clear case of convenient “self assessment”.

The affairs of Maytas and their dealings with the government of Andhra Pradesh (GoAP) reek of corruption and fraud. Within two days after the Satyam fiasco, the GoAP issued an order on 20 December 2008 sanctioning Rs 121 crore for Maytas Infra to construct a 30-km stretch of the state highway in Kadapa, the district of the chief minister, Y S Rajasekhar Reddy. The work was awarded on nomination basis, that is, without formal bidding and competition. The road is supposed to provide connectivity to an irrigation project being executed by Maytas. Works on nomination are awarded only for small amounts and in emergencies. But the state government has been violating all such norms in doling out contracts to their favourite companies.

This has happened even while reports indicate that Maytas Infra’s capacity to mobilise its 30% share of Rs 1,590 crore for undertaking the deep-sea port work at Machhilipatnam needs to be reviewed. Further, Maytas has not been able to pay its due of Rs 11 crore towards development charges, impact fee, etc, to Hyderabad Metropolitan Development Authority (HMDA) for the last several months for its flagship venture, Maytas Hill County SEZ, in an area of 300 acres on the outskirts of the city. Maytas seems to be asking for extensions to pay this amount. Yet, even before obtaining any formal approval, the company started advertising and taking booking for luxury apartments, villas and duplex houses.

Satyam’s failed attempts to take over Maytas ventures are directly linked, among others, to the metro rail project bagged by Maytas Infra as part of a consortium. It has signed a highly favourable concession agreement with GoAP and has to achieve financial closure in March 2009. It has to pay Rs 240 crore as performance security by middle of March 2009 and has to show how the initial project estimate of Rs 12,132 crore is going to be mobilised.

This has become a tough task given the reluctance of financial institutions in India and abroad to lend massive amounts due to the global economic crisis. Satyam’s acquisition of Maytas Infra would have propped up its market ratings and enabled it to approach lending agencies in the next two to three months before the financial year closes. Since the Satyam managers were very confident of pushing their plans, Maytas Properties was also included for “acquisition” since that would have pumped in a lot of liquid cash to facilitate their large real estate ventures around Hyderabad and other cities.

• C Ramachandriah (Citizens for Better Public Transport, Hyderabad)
• (Courtesy: December 27, 2008; EPW | Economic & Political Weekly)
• Click here to Download the PDF : Scams Together: Satyam-Maytas-Metro Rail
  from EPW
• Also Read ‘The Truth about Satyam‘ COVER STORY (MoneyLIFE Issue, 15th Jan 09)