Hyderabad: Mahindra Satyam, the software outsourcer created by the takeover of fraud-hit Satyam Computer Services Ltd by Tech Mahindra Ltd, plans to sue Satyam Computer’s founder B. Ramalinga Raju and claim damages from the sale of his land assets.
Mahindra Satyam chairman Vineet Nayyar, responding to questions from shareholders at the company’s annual general meeting on Tuesday, said the company will approach the government seeking a share from the proceeds of the land and asset sales to cover losses suffered by the company and its shareholders.
More trouble: A file photo of Satyam founder B. Ramalinga Raju.
“Whatever assets Ramalinga Raju owned have been attached by the government, and the government will dispose them off and settle claims,” said Nayyar, who is also vice-chairman and managing director of Tech Mahindra. “At that point of time, we will make a representation to the government seeking compensation for the losses that were caused to the company and the shareholders (by Raju).”
Raju disclosed in January 2009 that he had fudged Satyam Computer’s books over the years to the tune of at least Rs7,136 crore—India’s biggest corporate fraud. Tech Mahindra acquired the company three months later.
The Central Bureau of Investigation, the country’s premier investigating agency, is probing the fraud. The Enforcement Directorate (ED), which investigates violations of foreign exchange norms, confiscated around 550 acres owned by the Raju family in and around Hyderabad. The assets attached were worth at least Rs1,000 crore, ED officials had told a court in August.
Nayyar said Mahindra Satyam will also consider suing Raju for the loss caused to the company and its shareholders. The company cannot file a criminal case against him as the government has already done that, he added.
In a related development, several minority shareholders of Mahindra Satyam raised concerns about the timing of a proposed merger between the company and Tech Mahindra, and said that a premature merger might harm their interests and work only in favour of Tech Mahindra shareholders.
G.N. Ravi, a retired marine engineer and a minority shareholder in Mahindra Satyam, said the stock’s valuation would be lower because the company’s financials have not been finalized, and those announced after a forensic audit were mostly qualified by the auditors.
“No foreign institutional investors will show (an) interest in a company whose financials are unclear, litigations are unsettled, and profit margins yet to improve,” he said. “We want the management to keep on hold the merger till the financials of Satyam improve, allowing it better valuations so that the Satyam shareholders, who lost badly after (news of) the fraud broke, can be compensated adequately.”
Mahindra Satyam’s management had initially said the merger process would immediately follow the restatement of accounts, but later deferred it, citing “wrinkles” that need to be “ironed out”.
Nayyar said the merger was meant to benefit both Mahindra Satyam and Tech Mahindra; a decision will be taken only after the approval of shareholders of both companies, he added.
“The merger is currently not in the pipeline, and we will definitely look into the concerns of minority shareholders of Satyam at the time of the merger proposal,” said C. Achuthan, a government-appointed director on the Satyam board and a former presiding officer at the Securities Appellate Tribunal.
M. Damodaran, former chairman of the Securities and Exchange Board of India, India’s markets regulator, and a director on Satyam’s board, welcomed the expression of concern by minority shareholders. “It is good that these things get expressed so that they will be resolved.”
Meanwhile, some Mahindra Satyam shareholders representing IL&FS Ltd have opposed the adoption of balance sheets for the 2008-09 and 2009-10 fiscal years, objecting to the treatment given to an amount of Rs1,230 crore that the company showed as “suspense account”.
The amounts, which Raju claimed to have arranged from certain entities, should have been shown under “contingent liabilities”, said Sachin Gupta of IL&FS.
Maytas Infra Ltd, an infrastructure company promoted by Raju’s family and now controlled by IL&FS, had earlier served a notice on Satyam’s new management, claiming there was some documentary evidence that showed around Rs390 crore of its funds flowing into Satyam through Raju.