Date:23/12/2008 URL: http://www.thehindu.com/2008/12/23/stories/2008122360280500.htm

Andhra Pradesh - Hyderabad

‘No favours done in Satyam deal’

A. Saye Sekhar

HYDERABAD: “Independent directors acted truly independent and have not doled out any favour to the promoters group of Satyam Computer Services Ltd. The interest of promoters in the companies targeted for acquisition doesn’t make the latter untouchables,” said T. R. Prasad, former Cabinet Secretary and an independent director on the board of directors.

The reversal of the decision had only demonstrated the company’s faith in its shareholders and its respect towards their sentiments. Lack of communication was the main reason for the sharp reaction from the shareholders.

Mr. Prasad told this correspondent that the Board of Directors was thoroughly convinced about the proposed acquisition, as “IT spend is expected to come down in the developed markets and infrastructure is seen as a sector with enormous growth potential.”

Satyam had liquid cash and the opportunity cost of capital had been properly worked out. As big companies like L&T could not be acquired, Maytas Infra, a listed company, was targeted and its price was already discovered by the market. The outlay proposed is Rs. 1,504 crore for Maytas Infra. Maytas has a very impressive order book including HMRL. We found that there is a synergy between Satyam and Maytas Infra and the price is in accordance with the SEBI guidelines. Therefore we felt that no favour is being done to anybody.”

Maytas Properties has 6,800 acres of land bank. “The resolution of the board was to invest up to Rs. 6,400 crore as may be valued by the company in consultation with bankers, consultants and other intermediaries, and pursuant to other statutory and regulatory requirements. If there is any legal problem, they will have to fulfil the requirements.” He suggested three distinct categories of evaluation and the same had been agreed to by the members on the board i) completed projects for which the valuation be based on actuals; ii) work-in progress for which valuation be brought in alignment with current market realisations; and iii) for lands awaiting development, valuation be based on the basic market value notified by the State government for registration of sale of such lands.

He further added that if the final valuation of Maytas Properties as proposed above was significantly higher than the aggregate of the above three valuations, full and proper justification be provided for such higher valuation to the satisfaction of the Board. To a query on the “pious obligation” on the part of independent director at least to offer to step down when the decision was reversed, Mr. Prasad said: “Why should we, when necessary safeguards are built in the deal and it is subject to all rules and regulations laid down?”