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Maytas Properties: 19.7 cr. profit, valued at 6500 cr.


From sources I have found that Maytas Properties, the unlisted company that Satyam wanted to buy, had reported a turnover of Rs. 280 crores, and a net profit of 19.7 crores.

Satyam intended to pay Rs. 6500 crores for this company – which would be a P/E of around 325. (Slightly high, one might think, but in these times one does not think, apparently)

Maytas Properties, in it’s balance sheet, shows “Unsecured loans” of 600 crores. These are listed later as “Compulsorily Convertible Debentures” issued in 2007-08 – that would mean they get converted to shares.(Out of this 360 crores is in cash, the rest is some “unbilled revenue”, and “advances to subsediaries and other companies”)

We don’t know who owns the debentures. The dilution seems to be only 10% – meaning someone had invested at a potential value of 6,000 crores fairly recently.

So why didn’t the Satyam non-exec directors see all of this? It’s because, they say, a big-four company they won’t reveal who did the valuation. And of course they can’t be expected to spend so much time valuing a deal – wasn’t management was paid for that?

Sandeep Parikh has written about the directorial compensation – here’s the figure from their annual report:

Also, he writes, the Maytas Properties land bank of 6800 acres is largely unverified.

This whole thing stinks. It’s not less stinky than, say, the Reliance Power stake transfer, or the Vedanta restructuring – they all stink, just the procedure is different. Reminds me of BOGUS – Bend-Over-Grease-Up-Stupid.

Sure, it’s over and behind us. And Satyam’s offered a buyback. At about 168 the market cap of Satyam is 11,000 cr. and a 10% buyback (the maximum allowed) will cost them 1200 crores. And is unlikely to mean much to anyone; customers will still be wary, business will stay affected, Maytas will have to pay back those loans and investors. It would perhaps be in their interest to offer every shareholder Rs. 50 per share as dividend – that will cost about 3600 crores, but then it gives every shareholder the right to invest, gasp, in infrastructure and properties themselves.


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