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Subhiksha: Another Satyam in the making?

Sidin Vadukut writes at Mint, about the potential acquisition of “Blue Green Constructions and Investments” by Subhiksha, the ailing retailer whose IIM educated owner, R. Subramanian has been ranting and raving about how his stores need capital no one is willing to provide, dammit, and he’s entitled to at least a loan, dammit: (Okay, Sidin didn’t say all that, I did. What he said follows)

Blue Green’s director’s report for 2006, available at states that an “M. Rathinakumar” stepped down as a director of the firm on or before 10 April 2006, almost two years before the stake acquisition.

According to documents filed with the ministry of corporate affairs website by Subhiksha, the company secretary of Subhiksha happens to be one “M. Rathinakumar”.

It is uncertain if both individuals are the same and when approached for a clarification, Subhiksha’s company secretary M. Rathinakumar asked us to route all queries through the managing director’s office. (Subramanian was repeatedly approached by Mint for clarifications on 5 and 6 March. He said that he was not in a position to respond and was waiting to hear from his IT staff.)

Information on domain name registrar Net4India Ltd further indicates that the email address to contact the owners of Blue Green’s web address is This information was added to the Net4India database on 10 June 2006. Vishwapriya Financial Services and Securities Ltd is the name of a non-banking financial company started by Subramanian in 1991, which would later be involved in an IPO (initial public offering) financing scandal. The controversy led Securities and Exchange Board of India to place a five-year ban on Viswapriya from dealing in the capital markets. In response to an emailed questionnaire, R. Ganesh, chief manager of Viswapriya, clarified that the firm currently had no relations whatsoever with Subhiksha.
Further, the telephone number shown on the Blue Green website is identical to those of two other listed companies: Aramusk Infrastructure Investments Pvt. Ltd and Beta-Kappa Investments Ltd. All three companies also have websites that are very similar in design, layout and uploaded information. Aramusk’s domain name was created on 11 June 2006, one day after Blue Green’s.

Beta-Kappa’s domain name registration information gives the administrative contact as a “Subramanian, Ramaswamy”. In addition, Beta-Kappa’s board of director information shows a “M. Rathinakumar” as a member of the board since 3 July 1995.

It is clear from this information that directly and indirectly all three companies, including Blue Green, may have ties to Subramanian and key Subhiksha personnel that trace back to well before the June 2008 stake acquisition in the company by Subhiksha’s promoters.

Calls made by Mint to the identical phone number given on all three companies’ websites were automatically forwarded to a company called Matrix Financial Services Ltd. (Phone calls to confirm ownership of this company were not returned.)

These links with Blue Green raise fresh doubts about the merger and potential conflict of interest issues arising out of Subramanian’s ties to both companies involved.

ICICI Venture and Azim Premji have large investments in Subhiksha. That money is likely being used, and so would any loans if they were forthcoming, to fund this “acquisition”. Using someone else’s money to fund the buyout of a company you own (or you’re likely to have an interest in) – hey, wait, where did we hear that one before?

Scandals thrive in bad times. Given this is an especially bad time, isn’t ONE Satyam a little too less? Hopefully, this time, they won’t do stunts like getting a P.C.Gupta to replace the company board with smiling faces, doing press conferences and telling people that yes, we will “consider all options including a sale”, do a brouhaha about how they will “qualify” people who want to buy, and eventually offer a tender-coconut as the only remaining asset, with a reasonable degree of doubt it has already been mortgaged to a local vendor.

Let these companies die, darn it.

  • Arkad says:

    >Time & again,business ethics & values cannot be learned in some classroom courses.

    I admire IIMs &IIT's and other top B-schools.

    Look at what worlds topmost B-Schools minds,fund managers,economic experts & analysts have made to 150+ yr old lehman brothers.

    But all it boils down to social values,which are earned in hard ways.

    What will Premji & ICICI ventures will do – unnecessary will hit there stocks in this -ve market sentiments.
    Satyam had ISB on board 🙂

  • Anonymous says:

    >Are u saying that the government did the wrong time of working to save satyam and the 50,000 jobs there without puting in a single rupee?

    Lets not call it a bailout. And no the governement is not forcing anybody to buy it. The bidders are making their choice based on the information that they have. If they want to buy Satyam then its a free market. I think the governemnt did a commendable job in moving fast and getting a strong board in place to save the company.

    Cant figure what u r opposition is about?

  • Deepak Shenoy says:

    >Uhem – I haven’t called it a bail out, and this is not a rant against the government, but against the “show” of trying to save a company that should have gone bust.

    It’s true that the government hasn’t actually spent a lot of money yet, other than perhaps when they reveal how the 600 cr. loan was provided to Satyam. Still, the saving of 50K jobs is a farce – these jobs aren’t going to be lost if Satyam goes bust; new ones will be created.

    Btw, there was no “bailout” of bear stearns either; JP Morgan bought it, but the government did provide a back stop to the liabilities. In Satyam’s case, the liabilities are only the salaries and general expenses, one would imagine, and the loans they receive to tide those over may be the only bailout – it will eventually show up after the purchase is over, where things really lie.

    My deal is that companies that are going bust should be let to die – the government is taking the correct stance on the Subhiksha issue which is no stance at all. I just hope we don’t have to do a big drama everytime a company is about to fail – Satyam is likely to be the exception if things do go through smoothly.

  • Anonymous says:

    >What is the “show”? They have actually saved the company.

    Why should it have gone bust? It is profitable and makes money. Was subjected to a fraud by its promotors and the fact that there are bidders for it indicate that they believe that there is value in the company and worth acquiring inspite of the potential liabilities.

    Subhiksha is different case. It is a unviable business which is preventing anybody from bidding for it.

    There is no drama when a company is going to fail. There are enuf cases in the BIFR which neither the government or anybody makes a hue or cry. That is the principle of the free market.

    In case of Satyam there was a systemic risk in the terms of the impact that it would have had on the credibility of India inc which is where the government moved in and rightly so to sort the mess.

  • Deepak Shenoy says:

    >The government has saved the company a lot lesser than the US government saved Bear Stearns or LTCM. (i.e. they didn't, they just created a package deal) We're doing somewhat the same thing.

    If Satyam was profitable it would survive anyhow – as it is today, but we don't know about tomorrow. There may be "bidders" but the main guys out there – L&T and Modi – have still to make real bids. But the point is: Did we need all the government bandwidth to try and rescue the firm? Could it have not happened anyway? Would it have been better dead and cut up into pieces?

    The jury is out on it – and the Satyam episode still has to unwind. The new buyer – if there is one – will have to figure out the "real" liability, and then we'll see if the government only made a takeover possible (as it seems today) or is trying to effect a sale before more sinister details are out. Suddenly today people have been told to "shut up” and that there may be a $800m legal liability on the buyer.

    Satyam has zero systemic risk on failure – there is no “system” that depends on Satyam’s survival. All that would happen if it went bust was hajaar small and smart companies coming up to serve the same clients.

    Still, some time to go. We will have a lot more of the “bailout” business; Satyam isn’t anywhere close to that.

  • Anonymous says:

    >The main guys still have to make "real bids" bcos the proces has just started.

    About your point that one doesnt know whether Satyam will remain profitable tommorrow. Well it is caveat emptor. The not so intelligent brains at L&T, Modi, Hindujas, Tech mahindra, HP, CSC etc seem to think so for them to bid in the process. Untill and unless you seem to have some inside inputs or insight to indicate so otherwise I would go with all these not so intelligent ppls assesment that Satyam will survive and that their is value.

    "Suddenly today people have been told to shut up " – They havent been told to shut up. They have been told not to speak to external parties and route all communciation thru official channels. As there should be no undue advantage arising to any bidder because of insider information. I dont understand what u r point here is. This is standard procedure that all companies will adopt if they were going thru a acquistion process.

    On systemic risk – systemic risk also includes the loss of credibility that a nation / industry suffers in the eyes of various stakeholders. Similar to the way you suggested that rating agencies should be made irrelevent bcos they got their ratings of the financial sector wrong. Throwing the baby out of the bathwater.

  • Anonymous says:

    >I dont understand this, about 5 million people according to Govt have lost jobs in India due to slowdown – no one to bail those poor garment export employees, but we needed to ‘ Save Satyam’ because its bad PR for India, Inc what double standards. The rule of business is you dont bail out, if you do then one day some one needs to bail out the Govt.

  • Anonymous says:

    >It is a open seccret that Subhiksha ia an unviable proposal. The cruel intelligence was to borrow to the brim and show a big picture to the corporate world and sell this one to biggies eithen an Indian or a foreign company and make about 2000 crores. This was the original script. RS succeeded in the first part. He started the second part also and unfortunately the IPO sentiment and the economical slow down exposed his game plan and now on the streets. The bankers who gave money without any due deligence and the auditors who fell in to his trap are the real culprits. All these companies loike Beta Kappa, long short, Blue green are owned by RS only. What a funny name to cheat?? Luckily our system ia not that bad and so the full game did not go through!!!

  • subra says:

    if u think that Tech Mahindra got the Control of Satyam so easily, welcome to the land of naive people. In a country where to get my Income tax refund (my own foolishness of over paying!) i have to pay 10%, u think this deal is clean, well well.
    Satyam should have been allowed to go bust, the properties sold – people would have found jobs. Arthur Anderson closed down PwC picked them up (ha and PwC signed Global trust bank and Satyam!!)..
    Viswapriya continues to accept deposits from the public from ALL OVER INDIA and is now supposedly defaulting…RBI, IT, SEBI are all busy prosecuting Subhiksha EXACTLY during this period. Mera Bharat Mahan.