The day after, Raju announced his ill-fated plan to shell out $1.6 billion to acquire his sons’ companies, Maytas Properties and Maytas Infra. It created such a furore that Raju was forced to backtrack. But what was widely seen as a move by Raju to bail out his sons was actually aimed at covering Satyam’s tracks through fictitious cash transfers (details inside).
The timing of what is being called `India’s Enron’ could not have come at a worse time – just when the stock market was showing signs of responding positively to the Centre and RBI’s moves to stimulate the economy through interest rate cuts, duty reductions and accelerated government spending. A day after the sensex crossed the 10,000-mark, it plunged by 749 points, wiping out almost Rs 1.3 lakh crore (or trillion) of market capitalization.
There’s intense speculation as to what finally triggered Raju’s confession of wrongdoing. It’s clearly more than coincidence that it came hot on the heels of investment banker DSP Merrill Lynch’s letter to the company on Tuesday evening (followed by another to Sebi this morning) terminating its 10-day-old agreement with Satyam to advise it on strategic options because of “material accounting irregularities”.
But the beginning of the end came when furious investors forced Raju to reverse his decision to acquire the two group companies (Maytas Properties and Maytas Infra), robbing him of his last chance to wriggle out of a very tight corner.
By the end of Wednesday, the knives were out with Sebi, the stock exchanges, the Indian Chartered Accountants Institute, the department of company affairs and institutional investors announcing/considering a flurry of probes/actions against Raju, Satyam and its auditors. NYSE has halted trading in Satyam ADRs (American Depository Receipts).
Fearing violence, the Hyderabad police threw a cordon around Satyam’s offices and Raju’s residence in upmarket Jubilee Hills even as the company’s wholetime director-now-interim CEO Ram Mynampati, after expressing “shock”, swung into damage control mode.
source: The Economic Times