Emergic: Rajesh Jain's Blog

Emergic: Rajesh Jain's Blog header image 2

A-Satyam

January 8th, 2009 · 15 Comments

Nothing could have prepared anyone in corporate India for the Satyam news story which broke on Wednesday morning. It is India’s Enron and Madoff combined. As a good friend put it, Satyam will now have a very different meaning for a generation of Indians.

Even as the wreckage is sifted through, it is critical to ensure Satyam as an organisation keeps running — there is too much at stake here for its employees and customers. Some government involvement may be needed to ensure a quick resolution since no buyer will be willing to take any risk on its books. Uncertainty will not help anyone. At Rs 40, the stock has gone as low as it can probably go.

There are many questions about all that has happened. “Why” is the first.  And presumably, over time, we will get some of the answers. But an incident like this is a major wake-up call for the lax standards of corporate governance in India. Talk privately to some investors, and they will talk about “promoter issues.” This is not the only big blow-up that India Inc. is likely to see in times to come.

Another friend put it all in context: we seem to be following the US in all the wrong things. First, we had our 9/11 with 26/11. Now, we had our Enron. Wonder what’s next. Hope the next elections don’t throw up an Indian Bush.

Tags: Uncategorized

15 responses so far ↓

  • 1 Jnan Dash // Jan 8, 2009 at 5:37 am

    Let us hope this incident of utter fraud in the corporate sector is not taken lightly by a country where corruption is an accepted norm and bending rules is an honorable practice.

  • 2 GP // Jan 8, 2009 at 7:40 am

    All this (and the Madoff scandal) shows that anyone who is wicked smart can do almost anything. The only real way to stop this is to ensure that when it happens, the guilty get punished so severely that others who may be considering similar frauds really think hard about the consequences.

    Capitalism and indeed civil society can’t survive if there is no rule of law. Harshad Mehta, Ketan Parekh, etc..are still running around free. That’s the real problem. The concern I have is that even with his public, written & signed confession, he will be able to escape jail-time through his political connections.

  • 3 Karan // Jan 8, 2009 at 8:40 am

    Raju had to pay politicians and he had to raise money from some cash cow. Sad to see 20 years of hard work going down the drain.

  • 4 Nadeem // Jan 8, 2009 at 9:48 am

    It’s indeed sad to see Satyam saga take such a turn. The sheer scale of it is shocking. How could the auditors have missed it? What were the other top bosses doing? In the case of Enron, most of the top management was part of the scam but it seems surprising, to say the least, that no one knew what was going on. In any case, it is upto the government to make sure that a thorough investigation takes place and the guilty are punished. We rightly lauded our IT pioneers such as Narayana Murthy, Azim Premji (and Raju, in the past) for making India a software powerhouse. Now, let’s not shy away from making Satyam’s top honchos accountable for their actions that have caused such havoc.

  • 5 Ramesh // Jan 8, 2009 at 11:43 am

    Well, the chaiman could use defence 2.0.
    http://www.rameshsrivats.net/2009/01/satyam-chairman-on-trial.html

  • 6 Sundar // Jan 8, 2009 at 11:46 am

    It is strange that government and their agencies are sitting and watching the uncertainity.

    Raju should have been arrested by now and government should have put the company under receiver and ensure that the operations continue and then merge in full or partially with other companies.

    Satyam is too big to fail considering the impact to their clients, employees and the credibility of our nation.

    It is ironic that no one knows where he is! and what he is doing.

    This crisis is another opportunity to strengthen our corporate governance. Will our politicians and government do?

  • 7 Prem Arora // Jan 8, 2009 at 2:11 pm

    Which Game have Ramlina Raju done that is the only one lesson to those investors who have blind faith in IT sector. Actually the reality is not that which seems on the curtain of Stock Exchange. There are many Raju who are doing like that, there is a necessity to indetify. Even I highly appreciate yours efforts in IT sector and wishes you all the best. But there is deep necessity to indentify of these Raju. with warm regards!
    Prem Arora
    Shri Sai Services
    09837793421

  • 8 banerjee // Jan 9, 2009 at 6:48 am

    Here’s a comment from 6 AM Pacific:

    “Certainly there is more to it than meets the eye… I even begin to suspect whether money ($115 million in 1999 $) did really change hands in SATYAM – INDIAWORLD deal… Rajesh Jain, the seller had he received that kind of money in full, would have gone much beyond floating a nondescript Netcore solutions and limping along with it. Hardly the stuff creative enterpreneurs will put up with, especially if it’s a windfall of the kind he got. My vibes tell me that 10% (even that’s a big deal for a portal like bawarchi.com, khel /khoj.com etc. back in 1999) would’ve been paid up, balance would’ve been stashed away in secret accounts of Raju and family.

    Yet another piece of the puzzle is how they built out fabulous real estate across geographies if all those revenues, earnings and cash balances were all cooked up. Who knows, true to tech traditions, Raju may even turn around and say all of that is an illusion, kind of 3D virtual reality gotten way too real.”

    Any comments?

  • 9 Saurabh Garg // Jan 9, 2009 at 4:50 pm

    Not sure about that Rs. 40 opinion ;P

  • 10 Ajeya // Jan 9, 2009 at 8:10 pm

    Mr. Banarjee, you are right, even today 500 crore is a serious money very big, if you ask suddenly that how many zeros for 500 crore many people will take some time to calculate. Even, rajesh may take some time. How come “IndiaWorld” get 500 crore with its meager profit of just 2.5 million rupees ……..? Do anybody answer how much money satyam earned by investing 500 crore from it ………? What rajesh is doing after that ……….? Only he can answer. With 500 crore in 1999 even with thumb rule investing rules he could have made 5000 crore. Even if he distributed to all initial investors of “IndiaWorld” he would have saved half of it, hence that works around 2500 crore today. There is no news of Rajesh Jain after that.
    I think after “satyam” saga we started suspecting everyone ………………

  • 11 Abhijit // Jan 9, 2009 at 11:18 pm

    @ Banarjee & Ayeja:

    Ehhh… This is Rajesh Jain’s blog!! 🙂

  • 12 John // Jan 10, 2009 at 7:05 am

    Rajesh Jain connection to this scandal is now Finacial Times also. It is also matter of time following the money trail that cops knock at them…

    In 1999, the group shocked investors when one of its units, Satyam Infoway, paid Rs5bn ($104m) for IndiaWorld, a little-known dotcom company. The price represented a multiple of 50 times IndiaWorld’s annual revenue of Rs10m and 2,000 times its net profit of Rs250,000.

    While such deals were common during the internet era, Satyam agreed to pay for IndiaWorld with cash rather than paper, leading to mutterings within the market that something was amiss with the transaction.

    The following year, Satyam pulled off an even more spectacular feat when Satyam Computer merged with a subsidiary, Satyam Enterprises

    http://www.ft.com/cms/s/0/7768205a-de7e-11dd-9464-000077b07658,dwp_uuid=a6dfcf08-9c79-11da-8762-0000779e2340.html

  • 13 Vishwas // Jan 12, 2009 at 8:14 pm

    Satyam employees speak on JobeeHive.com. Check it out: http://jobeehive.blogspot.com/2009/01/satyam-employees-speak-on-jobeehivecom.html

    also latest Satyam reviews by employees: http://www.jobeehive.com/company-reviews/satyam-computer-services

  • 14 Manish Somani // Jan 13, 2009 at 5:10 pm

    Dear Mr Rajesh,

    Satyam Infoway paid Rs 499 crore to acquire IndiaWorld, a compilation of portals with a turnover of a paltry Rs 1.3 crore and you in turn became a techopreneur. The consideration amount paid by Satyam would have surprised many investors but the world was tech crazy then.

    Frankly, as a shareholder of Satyam I was worried about its propensity to pay so much more when it could have paid far less for a dud site with 1.3 crore turnover outfit with 20 people. The price represented a multiple of 50 times IndiaWorld’s annual revenue of Rs10m and 2,000 times its net profit of Rs250,000. Rediff-on-the-net attracts more eyeballs than Indiaworld at that time.

    IndiaWorld’s high valuation was, in large part, due to the tremendous brand equity of its portals (khel.com, khoj.com and dhan.com, among others). But why value something that cannot be seen or felt at that price.

    Some of the experts felt that the value of a company varied depending on the buyer. For example, a strategic buyer could be willing to pay a higher price for a company compared to a financial buyer. Analysts argued that the acquisition of IndiaWorld by Sify was made with a strategic objective. Now I suspect Raju had an ulterior strategic objective. I suspect that you might have some clandestine dealing with him as well.

    Acquisition by Satyam Infoway could mark the start of the company siphoning funds overseas under the guise of acquiring companies. The purchase coincide with the eight-year period for which the data has been fudged. There are so many questions that the Indiaworld acquisition raises, which Raju can probably answer now. I think you need to make your dealings clear as well.

    I am going to take an active interest in pursuing this case. Please brief us about your point of view on this and involvement in this fraud.

    Mr Jain character is much easier kept than recovered

    Best,

    Manish (Mobile 9958006642)

  • 15 Mahendra // Jan 30, 2009 at 1:16 pm

    Surprising to see these comments! It can only happen in India. Hotmail was sold to Microsoft for a reported sum of $400 million before this Indiaworld deal. Not based on revenue Hotmail was earning but its potential & potential of Internet. Compare to that – $103 million is much less what Mr. Rajesh has got. So, please don’t question his integrity and talent.

Leave a Comment