Retail investors who entered buyback stocks have been hurt as stocks crash after initial bounce.

1. Money & Forex
Stocks
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BSE Sensex 9323.59 82.88
Inter-bank call 4.24 0.01
S&P CNX Nifty 2828.45 44.55
US $ 48.80 0.51
Nifty Fut (Jan 09) 2815.40 47.60
Euro 64.42 1.34
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Global Indices Commodities
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Nasdaq 1529.33 42.26 Gold (Rs/10gm)13240.00 155.00
Dow (DJIA) 8281.22 317.96 Silver (Rs/1 kg)18515.00 30.00
FTSE 100 4147.10 301.40 Brent crude ($/bbl)44.50 0.51
Vol. 4 Issue No. 02 Mumbai, Monday, January 19, 2009
Nikkei 225 8230.15 606.65 LME copper ($/tn)3280.00 85.00
D A I LY NEWS & A N A LY S I . MONEY
The canary sings: 100 knew it
straws in the wind
■ De facto finance chief GRK bares the Satyam scam to cops
Raju cried
■ He ran a private finance operation answerable only to Raju
IBM threat
■ Bank statements were forged, hand-delivered to auditors Ramalinga Raju had made
an emotional pitch, saying
K V Ramana. Hyderabad One source privy to the inves- even to some senior executives of Satyam faced a takeover
tigations said CID officials were the company No one ever knew
. threat, as the reason for the
Even as the focus continues to be stunned by some of the revela- what was cooking here. push to acquire Maytas.
on the founder of Satyam Com- tions. Though Srinivas Vadlamani Raju had told the board that
puter Services B Ramalinga GRK, a vice-president in the is the official chief financial of- IBM and another company
Raju, his brother and former finance department of Satyam, ficer, a senior Satyam source,
AXIS’ NEW DEMAND FROM EMRI planned to take over
managing director of the com- is said to have helped the inves- who did not wish to be named, Satyam because of its
The Emergency Management Research Insti- pany Rama Raju and ex-CFO tigators open the can of worms said GRK used to call the shots. names of 100 staffers who had “Basically I have an assistant
, strong cash balances, a
tute (Emri) has run into further trouble, with Srinivas Vadlamani, officials of — actually said a source famil-
, “Sometimes, GRK used to over- knowledge of the goings-on in whose name is Rama Krishna to member present at the Dec
lender Axis Bank asking for a fresh guaran- the criminal investigation de- iar with the development, “He rule Srinivas in taking some de- the backrooms of India’s fourth- look after the audit of account 16 meeting said. PTI
tee to a Rs 38 crore loan. Axis, which had ad- partment (CID) seem to have got told the investigators more than cisions. Only Ramalinga Raju largest IT firm. books and he is working with me
vanced the sum to Emri for meeting opera- a major breakthrough in the what they expected”. used to prevail upon him,” the The CID officials are now for about 10 years. For the entire
tional expenses, has invalidated the surety form of revelations by a senior GRK revealed the existence of source said. GRK is said to have planning to question all those of- audit, he used to take care of quarter. We used to have a quar-
following promoter Ramalinga Raju’s arrest. employee of Satyam — G Rama a parallel finance department told the cops there were many ficials named by GRK. Interest- book-keeping, accounts payable terly board meeting in Satyam,”
Krishna a.k.a GRK. within Satyam to take care of things happening privately with- ingly Srinivas Vadlamani, in his
, and accounts receivables and Vadlamani said in his confes-
NALCO NEARS INDONESIAN BUYS He is still narrating it all to “various issues”. in Satyam. confession, explained the role treasury management. He used sion statement last week.
Turn to Page 22
the investigators. The set-up was out of bounds He has also revealed the played by Rama Krishna. to give a report once in every
Nalco is close to picking up majority stakes
in two Indonesian mining firms at an esti-
mated investment of Rs 300 crore. The deal,
Taj checks in at Sea Rock
likely to be clinched in four months, would
Tilaiya bids
give the PSU ownership of coal blocks with
estimated reserves of over 300 million
tonnes, chairman and managing director
delayed by
C R Pradhan said.
siderable synergies can be
For the Bandra Indian Hotels
DADRI PROJECT NEEDS RS 20K CR generated by an association
a fortnight
Share price on BSE in Rs
hotel’s restoration with the Sea Rock Hotel.
The Dadri Power Project in Uttar Pradesh, 70
When the reconstruction is
being developed by Reliance Power, would
and operation 68.75
completed, the combined op-
60
need an investment of over Rs 20,000 crore,
Govt wants more
eration will be able to enjoy
according to group company Reliance Natur-
50
Ashish K Tiwari. Mumbai a leading market position in
al Resources Ltd (RNRL). This “colossal”
details from firms
north Mumbai,” Kumar
sum cannot be raised unless RNRL gets a 40
that had given
The Taj Group, the coun- said.
44.90
“bankable gas supply contract” from RIL,
try’s top luxury hotels He, however, refused to
30
said its latest affidavit filed in the Bombay
tech bids
chain, has entered into an comment on the branding of
High Court, where RNRL is fighting a case
20
arrangement with the Del- the Sea Rock under the new
over the terms of gas supply pact with RIL.
Oct 1, 08 Jan 16, 09 Shaleen Agrawal. New Delhi
hi-based Claridges Group, arrangement. The Nandas’
Buyback offers
ARCIL MAY FLOAT $600M FUND owned by Suresh Nanda and initial plan was to relaunch
his son Sanjeev, for the Sea completed.” the hotel under the Man- The opening of financial
Asset Reconstruction Company India Ltd
Rock Hotel, which has been IHCL owns and manages darin Oriental brand. In an bids for award of an ultra
(Arcil) is planning to float a $600 million fund
renamed The Claridges Taj properties under the Taj earlier interaction with mega power project
in the next three months for acquiring
Mumbai. Hotels Resorts and Palaces DNA Money, Peter Leitgeb, (UMPP) at Tilaiya in Jhark-
roiling shares
stressed assets. S Khasnobis, MD and CEO,
Confirming the develop- brand. Its 368-key Taj Land’s president and CEO of The hand to generate 4,000
said the fund would be in place by March.
ment, R K Krishna Kumar, End hotel is right opposite Claridges Hotels & Resorts, megawatt (mw) of electric-
Khasnobis said Arcil would infuse 20% and
vice-chairman of The Indi- the Sea Rock in Bandra in Sea Rock’s holding compa- ity has been delayed by a
the rest of the fund would be raised from for-
an Hotels Company Ltd suburban Mumbai. ny, had said that a letter of fortnight, apparently to
eign and domestic institutions.
(IHCL), told DNA Money, Between Taj Land’s End intent (LoI) in this regard seek more details from com-
Retail investors who entered buyback stocks have “The arrangement will be to and Sea Rock, which has 440 was in place already But the
. panies that earlier submit-
BHARTI PLANS IPTV SERVICES
provide technical and man- keys, IHCL will own about Claridges Group’s website ted technical bids.
been hurt as stocks crash after initial bounce
Bharti Airtel is all set to start internet proto- agement expertise for the 1,000 rooms, becoming the continues to list the Mum-
Another delay
col television (IPTV) services, which refers to restoration and operation of chain with the largest room bai hotel as The Claridges
TV delivered through broadband. Sources N Sundaresha Subramanian & back scheme is inherently flawed and the hotel, when the redevel- inventory in that part of the Mumbai (opening in 2011).
In December last year,
close to the development said Airtel may an- Khyati Dharamsi. Mumbai Turn to Page 22
misleads small investors. opment of the property is city. “We believe that con-
five companies —
nounce launch of services in next 1-2 days. He said under the present buyback
Jindal Steel & Power,
There is something curious about scheme companies need to announce
It’s death or rollover of
HDFC BANK AUTO LOAN CHEAPER Lanco Infratech, state-
buybacks.
run NTPC, Reliance
22/23 under water
A number of cash-rich companies
HDFC Bank has slashed interest rates on
Power and Sterlite
that have announced them are seeing
auto vehicles by up to 150 basis points from
Industries — had sub-
Of the 23 buyback offers currently
Monday Car and CV loans will become
. a downturn in stock prices.
debt for Unitech today
mitted the technical
open, 22 companies are trading
cheaper by 125 bps, while interest on two- Company managements announce bids detailing their
below the maximum buyback price
wheeler loans will be reduced by 150 bps. buybacks —- the reverse of an issue technical capabilities to
And two-thirds of these stocks are
of shares —- to instill confidence in carry out the project
trading lower than the price on the
its shareholders.
The deadline for sub-
day which the offer commenced
The repurchase, they claim, is an over. If they don’t, they will
Commercial paper mitting the technical
indication of the fair value of a share have to write off these
Gujarat Fluorochemicals and bids has been deferred
worth Rs 1,000 cr
and by announcing to buy them back loans. Under the present
Reliance Infrastructure lead the on numerous occasions
at a higher price than the prevailing market conditions, who
reverse-gear list
issued to funds is This is because bidders
market price, a company rewards its would want junk loans in
nobody’sbusiness Their share prices are at a 65% requested for more
investors. their books?”
up for maturity
discount to what they were on the
time to evaluate the
But a DNA Money analysis of the Among others, Reliance
day of the buyback announcement
manjul technical and financial
buyback offers currently open, shows MF, HSBC MF and Sun-
viability
Pooja Sarkar. Mumbai
that the opposite has happened. daram BNP Paribas MF
Of the 23 buyback offers currently a maximum price for buying shares have exposure to Unitech’s
open, 22 companies are trading below from the open market and not floor. Unitech, India’s second- debt papers, and are expect- The financial bids have
the maximum buyback price. And “Therefore, it is in the interest of largest realtor with a mar- ed to roll over the debt for been submitted and are
two-thirds of these stocks are trading the promoters to bring the share ket capitalisation of Rs 4,886 the next 15-30 days. now scheduled to be opened
lower than the price on the day which prices down. At the end of the day, crore as on January 17, had Sastha Gudalore of bro- on January 28, a person
the offer commenced. the buyback will indirectly increase a debt of Rs 9,900 crore on crore, on commercial paper kerage firm Alchemy wrote close to the development
Gujarat Fluorochemicals and Re- their holding in the company and its books at September end. issued to mutual funds, ma- in a report dated January 12 told DNA Money. Financial
liance Infrastructure lead the reverse- this is done by using the company’s As the date of maturity of tures today. that the Unitech manage- bids quote the price at
gear list: their share prices are at a reserves. Therefore, it is in their in- the loans draws nearer, ana- On the face of it, fund ment is hopeful of banks which the bidder proposes
65% discount to what they were on the terest to push it down.” lysts and industry experts managers appear optimistic taking over existing short- to sell electricity generated
day of the buyback announcement. Recent data by Delhi-based broker are wondering how the com- enough to roll over the debt. term loans and converting from the project when oper-
One senior investor, who has been SMC Global on the subject tallies pany intends to pay off its But going by an invest- them into long-term loans, ational.
Your today’s appointments sir — 10.30 with CID, Turn to Page 22
in the market for decades but does with the argument. debt. ment banker, “Mutual funds for 2-3 years.
12 o’clock CBI, 2 pm SFIO, after that... Turn to Page 22 Turn to Page 22
not wish to be named, said the buy- A debt of over Rs 1,000 have no option but to roll
ADAG holding in Swan THE FM GROSSLY UNDERSTATED HIS LIABILITIES WHILE RAJU OVERSTATED HIS ASSETS
FM’s cookbook rivals Ramalinga Raju’s
comes under scrutiny
Violation of substantial equity R Jagannathan
corporate affairs. ister) is simple. No matter how his budget, he makes guesses
Even as the DoT letter states that Swan had badly he runs his finances, he about revenues and expendi-
guidelines suspected submitted several undertakings and certifi- On January 7, Satyam’s Ra- has the ultimate bailout at ture —- the difference being
cates regarding compliance of the DoT norm malinga Raju sent a 1,069-word hand: a currency note printing the fiscal deficit, which is the
Nivedita Mookerji. New Delhi on substantial equity, the annexures (along confession saying he doctored press. Raju cannot plug the corporate equivalent of a loss
with the letter) indicate that there may have the accounts of his company hole in his accounts by print- (the profit equivalent would be
When Swan Telecom was allowed by the gov- been a violation of the guideline. by inflating the assets, mostly ing money Chidambaram can.
. a budget surplus).
ernment to operate mobile phone services According to the substantial equity guide- cash and bank balances. Why should finance minis- By refusing to recognise
across 13 circles one year ago (in January line issued by DoT in 2005, no single company The amount involved: Rs ters be allowed to give bogus several costs (the farm loan
2008), did Anil Ambani’s or legal person, either di- 7,136 crore, including accrued figures to the nation when waiver, and the oil subsidies,
ADAG group hold much rectly or through its associ- interest on non-existent bank Raju can’t do the same for his among others), the finance
In fine print
more than the permitted eq- ates, shall have substantial deposits. shareholders? How is Raju’s minister fooled us. When he
uity level of 9.9% in it? equity holding in more On February 29, 2008, P Chi- fudge any worse than that of presented the 2008-09 budget,
Tiger Trustees was incorpo-
Such a suggestion on than one licencee company dambaram, then finance min- the finance minister of India? he said the fiscal deficit would
rated in March 2006 as Tiger
Swan’s shareholding has for in the same service area for ister, also admitted to doctor- Were Chidambaram’s books be 2.5% of gross domestic
Traders Pvt Ltd with regis-
the first time come out in the access services (fixed ing the numbers of the coun- any better produced than product (GDP). We now know
tered office at Reliance
the open through a letter and cellular). try’s books —- but in fewer those dished out by Raju and it could be over 5%, and it’s not
Energy Centre in Mumbai
written by the Department Substantial equity words. his CFO Srinivas Vadlamani? because of the recession.
of Telecommunications means equity of 10% or He said: “I acknowledge While Raju cooked his borrowings —- was a piece of Take a look at what Raju Now let’s look at motiva-
The shareholders of Tiger
(DoT) to the ministry of cor- Traders are shown as Swan more. that significant liabilities of books by overstating revenues, fiction. The size of Chi- claimed in his confessional. tion, and examine whether the
Infonet with 50% holding and
porate affairs. As per the application the government on account of Chidambaram was understat- dambaram’s misstatement of He said he had overstated finance minister had nobler
Swan Advisory Services also
Under pressure from sev- submitted by Swan to DoT oil, food and fertiliser bonds ing his costs (subsidies on oil, government liabilities is esti- profits. You can overstate reasons for his fudge. If Raju
with 50%.
eral members of Parliament in March 2007 for licence are currently below the fertiliser, and food) to fool the mated to be at least Rs 1,50,000 profits by either creating was trying to impress in-
(MPs), who wrote to Prime across 13 circles, Tigers line….Our fiscal and revenue world. crore. And that’s just this year. make-believe revenues or by vestors and/or siphon money
The directors of Tiger
Minister Manmohan Singh Traders Pvt Ltd held deficits are understated to that Put another way he was
, The reason why Raju is in understating costs. Raju did for personal enrichment, the
Trustees on incorporation
for initiating a probe into 90.10% equity and Reliance extent…” saying that his fiscal deficit — jail while Chidambaram is the former. Chidambaram did finance minister was trying to
included Ashish Karyekar
the Swan shareholding pat- Telecom 9.8% in the appli- Shorn of gobbledygook, the difference between gov- talking of sending other peo- the latter. tell the world he was balancing
and Paresh Rathod, recorded
tern, DoT has referred the cant company . Chidambaram was saying ernment revenues and expen- ple to jail (mostly terrorists, Here’s how it works. When his books well even while buy-
as ADAG group employees
Turn to Page 22 Turn to Page 22
matter to the ministry of something similar to Raju. diture, which has to be met by since he is now the home min- the finance minister presents ing votes.