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Maytas Properties: 19.7 cr. profit, valued at 6500 cr.

From sources I have found that Maytas Properties, the unlisted company that Satyam wanted to buy, had reported a turnover of Rs. 280 crores, and a net profit of 19.7 crores.

Satyam intended to pay Rs. 6500 crores for this company – which would be a P/E of around 325. (Slightly high, one might think, but in these times one does not think, apparently)

Maytas Properties, in it’s balance sheet, shows “Unsecured loans” of 600 crores. These are listed later as “Compulsorily Convertible Debentures” issued in 2007-08 – that would mean they get converted to shares.(Out of this 360 crores is in cash, the rest is some “unbilled revenue”, and “advances to subsediaries and other companies”)

We don’t know who owns the debentures. The dilution seems to be only 10% – meaning someone had invested at a potential value of 6,000 crores fairly recently.

So why didn’t the Satyam non-exec directors see all of this? It’s because, they say, a big-four company they won’t reveal who did the valuation. And of course they can’t be expected to spend so much time valuing a deal – wasn’t management was paid for that?

Sandeep Parikh has written about the directorial compensation – here’s the figure from their annual report:

Also, he writes, the Maytas Properties land bank of 6800 acres is largely unverified.

This whole thing stinks. It’s not less stinky than, say, the Reliance Power stake transfer, or the Vedanta restructuring – they all stink, just the procedure is different. Reminds me of BOGUS – Bend-Over-Grease-Up-Stupid.

Sure, it’s over and behind us. And Satyam’s offered a buyback. At about 168 the market cap of Satyam is 11,000 cr. and a 10% buyback (the maximum allowed) will cost them 1200 crores. And is unlikely to mean much to anyone; customers will still be wary, business will stay affected, Maytas will have to pay back those loans and investors. It would perhaps be in their interest to offer every shareholder Rs. 50 per share as dividend – that will cost about 3600 crores, but then it gives every shareholder the right to invest, gasp, in infrastructure and properties themselves.

  • Nilesh says:

    >now this is known, can’t shareholders do something about it.

    Criminal and fraud charges must be put on Satyam management and very heavy financial penalty.
    – change of management
    – penalty equivalent to loss to all shareholders because of management actions. i guess their 8+ % holding should be sufficient for paying up this penalty.

    I guess at least FII’s and institutional investors can do this using their financial muscle.

  • Nilesh says:

    >btw i always had BAD image of this company from employee perspective (with all hard work they expect from their employees and minimal wages paid as compared to Infosys’s of world. now i will have BAD image from investors perspective as well.

    thank god i was never employee and direct shareholder (my MF investment may own it) of Satyam.

  • Anonymous says:

    >Deepak: I have an unsolicited suggestion (or rather request) for you guys (you and kaushik). Can we have a website where companies can be rated for their small-investor-friendliness (not just governance). This can be made part of moneyyoga or can be completely separate. The ratings will be done by the readers themselves (based on their real-life experience). If you guys are interested, i am more than willing to help whichever way i can help.

    For a starter, the companies in my “stay-away” list would be (completely personal opinion): satyam, lanco, GMR, GVK.

  • aman says:

    >Hi Deepak,

    to one of my querry regarding the stop loss prize of DLF you responded that it may even go to 300+.And indeed it has and even more.the daily delivery volume is low around 5%,but the way in which the real estate stocks have risen,do you think it to be wise to maintain the position without a stop.

    Also i have one doubt,in cases where one goes long,he risks only the networth of that particualr contract at the time of purchase,but when i create a short position in absence of stop loss,the loss may be unlimited,for e.g if i short a share x say at 100 rupees it can even rise to 500,so don’t you think shorts should be for shorter period and longs could actually be kept for longer periods?


  • Deepak Shenoy says:

    >aman: With respect to DLF – yes it’s gone above, and it’s getting close to a stop I now have at 320. If it breaches that today I will get out, but one generally needs wide stops for shorts.

    And yes, shorting has a much higher risk than going long in general. Shorts can be kept for long periods if there is enough conviction in the trade – if I get stopped out on DLF today I will reinitiate it as it deserves a lower valuation I think. Same with HDIL.

  • Deepak Shenoy says:

    >But Aman: I see what you mean, perhaps I should have gotten out earlier, and stuck on too long. Should maintaina strict stop on each trade, look at HDIL.

  • Anonymous says:


    Good blog. Satyam has done numerous similar shady transactions (legal but not ethical) in the past.

    A glaring example is a company called Satyam Renaissance Consulting. The story here is beyond the pale. Here, the dude who started Renaissance even claimed that he “invented” business/change management consulting. (similar to Al Gore claim of inventing Internet).

    Talk to some of their clients outside India. I personally know of 2 clients in Asia Pac region where the Satyam Business Head Virender Agarwal personally approved delivery of escort/sex services to win business.

    Unfortunately, Satyam is not alone. Cognizant is very simialr – just that they have not been caught raiding the cookie jar yet.

  • Guruprasad says:

    >Why people like you're not talking about Reliance. I think realiance is almost a corporate criminal. These guys split 1000 companies with a single company. Only in India you could see company like RPL, Reliance Power, RNRL get listed with billion of dollars in market caps without balance sheet. These guys are specialized in finding loopholes in corporate laws to come up with listing in stock markets. If you give money to people , you could do anything in this world. Even you could take this blog public and make money. This is the real scenario in India. Recently ADAG was in news for money laundering. But not even single question has been raised by anyone. Matter has been left out. RCOM didn't took Forex losses in its P&L ac. All these things are not an issue, but satyam is an issue. This is the reality in India. If you have moneypower and muscle power(in the form of MPs) you could escape any fraud. No one could raise any questions. I think not even a single listed company seems to follow corporate governance in India. No Indian company genuninely have any reason to speak about corporate governance, because none are following. Satyam has got caught in the process. Thatz it. There are lots who've not got caught. So think twice before writing as if satyam is the only company in India to do these kind of things.

    Disclosure: Never in my life I held RIL, ADAG, Satyam in my portfolio.

    Note: whatz the point of asking stop loss for DLF in this comment, which itself is a stupid thinking. Beauty is you've also responded to that question. If you're really responsible person, you'd ask him, whatz the point to ask this question in this writing about Maytas. But you didn't. For me this is unethical question, similar to what you think about Maytas properties. Only scale matters.

  • Anonymous says:

    >I agree with Nilesh —
    Sathyam promoters created good image of their’s in the society. however, the ultimate aim Satyam family is to get benefitted through Satyam computers and valuation of thier family properties at high levels.
    Satyam used big audit firm’s name who valued their properties in unlisted companies. HOweever, as per today’s ET news, none of the big four agreed about their in valuing the properties.
    the management of Satyam is to be changed in efficient hands.

  • Anonymous says:

    >Did not Cognizant build a new swimming pool for a VP-IT at a Hospitality company(Parsippany NJ), just so they can remain the only offshoring vendor and CTS fleeces that account?

    Invariably all of Satyam’s clients have multiple IT vendors, not so with many other IT companies I know of. Leaving aside this current fiasco, I do not know of a single Satyam client that complains about the good value that Satyam provides in terms of value for money? Talk about that.

    If an IBM screws up a $300 million contract after bolching up the project, they are allowed to bid for other bid contracts at the same customer, and they even win those. I have seeen this happen. If a Satyam has small issues on a $5 million project, customers come down hard and bans them. Contrary to what people think, the World Bank issue is silly – are there no instances of malware/spyware creeping into servers anywhere?

    It is all in contract management and how much access you have at the CXO level that matters. Indian offshoring companies are better value for customers overall, they work hard and want to please you. Just because some one is weak in contract management, you don’t screw them.