In 2005, Satyam Computer Services announced two acquisitions and showed a profit growth of 160 per cent in the October-December 2005. Shares doubled over 2005-06. In the first quarter of 2006-07, ousted, disgraced Chairman Ramalinga Raju and his associates sold 4.84 per cent at an average of Rs. 726 a share. Raju mopped up Rs 1,126 crore — in cash.
That is broadly how the promoters’ stake was brought down from 22.89 per cent to 8.74 per cent and garnered Rs 2,065 crore over the past seven years. Given the way one can raise loans by turning cash into equity and raising loans, this amount conceals more potential than might visible to the lay reader.
And still in his confession letter to the Bombay Stock Exchange admitting to India’s biggest corporate fraud, Raju said, “Neither myself, nor the managing director (including our spouses) sold any shares in the last eight years- excepting for a small proportion declared and sold for philanthropic purposes.”
After selling stakes amounting to about 14 per cent, Raju still held 8.74 per cent in the company as on March 2008 and its value in that quarter stood at 2,400 crore. But a lot of that was pledged to raise loans that eventually brought the house down on Raju.
The money mopped up through the stake sale by Raju would probably have allowed him to earn on investments, using a combination of debt and equity.
It is the general market belief that he invested a lot of money into his other family venture Maytas Infrastructure and Maytas Properties where the company has close to 7,000 acres of land. And thus the benefits generated by the strategic stake sale by possible manipulation of share prices would be much higher than the actual amount mopped up.
Given that Raju by his own admission committed fraud for six years, it is clear that the acquisitions in question that raised the share prices were part of the make-believe that he engineered to rig up prices.