Last Night I was amused and then rather angry to hear Prof M Rammohan Rao,an Independent and Non Executive Director on the Board of Satyam Computer Services Ltd

He was defending the decision taken by them for Satyam to acquire Promoter related Maytas Companies

Menaka of CNBC TV asked him which was the lesser of the Devils

• Entering into a secondary market deal with promoter related parties where the Satyam Monies would go to these related parties directly or
• Infusing Capital and  Investing directly into the Maytas Companies by accquiring New Shares 

Would you believe it !…Prof Rao professed that it would not have looked good for Satyam to directly invest in the Maytas Companies !…He is of the opinion that Monies directly to Promoters Sons is a better idea ! 

This Director is the Dean of ISB and as a Satyam Director earned a Commission of Rs 12 lakhs last year in addition to sitting fees of Rs 1.2 lakhs plus held 10000 Stock Options for Equity Linked Restricted Stock Units at a grant price of Rs 2 

Methinks this Dean needs to attend one of his Own Classes on Corporate Ethics and Governance at the ISB

Another Reflection…..Another Independendent and Non Ececutive Director,Prof Krishna G Palepu in addition to Commission of Rs 12 lakhs and Sitting Fees of Rs 40000 ,also received Professional Fees of Rs 79.51 lakhs from Satyam for FY 2007/8

Don’t you think such Monetised relationships will cloud the Independence of these Directors at Board Meetings ?

I mean, even if the Directors felt this Diversification was beneficial to Satyam,they surely must have realised that nearly all of Satyam’s Cash of @ US $ 1.5 billion would move out quickly to the Hands of the Promoters in this US $ 1.6 Billion Acquisition of their stake in Maytas Companies !…….Why would the Directors  have agreed to deplete Satyam of all of it’s cash !?…Defies Common Sense,Conventional Wisdom,Rationality and Logic

I have read the Conference Call transcripts to stakeholders to justify this decision as well as emails send by Satyam Founder,Ramalinga Raju to Employees and Associates after reversing the decision…..Was Delighted that SBI Mutual Fund and Templeton had the guts and courage to vehemently and voiceferously oppose Satyam’s Chairman and CFO in the Conference Call  

I too am a Satyam Minority Shareholder and I strongly advise Ramalinga Raju to keep quiet to avoid putting put his foot in his mouth and further dent “the established brand of Satyam” as he boasts of.

To appease shareholders Ramalinga Raju has now announced a Board meeting for December 29,2008 to consider Buyback of Shares

I would also advise  him to consider returning cash to shareholders through a High Special Dividend of atleast 1000 %…That would mean a dividend of Rs 20/share and an outflow of Rs 1340 crores on 67 crores shares of FV Rs 2…Even after this Satyam would yet have over US $ One Billion in Cash  

Reproducing Verbatim an interesting email received by me today….Gerald Celente predicts a very Bleak America soon…It’s scary

The man who predicted the 1987 stock market crash and the fall of the Soviet Union is now forecasting a revolution in America, food riots and tax rebellions – all within four years, while cautioning that putting food on the table will be a more pressing concern than buying Christmas gifts by 2012.

Gerald Celente, the CEO of Trends Research Institute, is renowned for his accuracy in predicting future world and economic events, which will send a chill down your spine considering what he told Fox News this week.

Celente says that by 2012 America will become an undeveloped nation, that there will be a revolution marked by food riots, squatter rebellions, tax revolts and job marches, and that holidays will be more about obtaining food, not gifts.

“We’re going to see the end of the retail Christmas….we’re going to see a fundamental shift take place….putting food on the table is going to be more important that putting gifts under the Christmas tree,” said Celente, adding that the situation would be “worse than the great depression”.

“America’s going to go through a transition the likes of which no one is prepared for,” said Celente, noting that people’s refusal to acknowledge that America was even in a recession highlights how big a problem denial is in being ready for the true scale of the crisis.

Celente, who successfully predicted the 1997 Asian Currency Crisis, the subprime mortgage collapse and the massive devaluation of the U.S. dollar, told UPI in November last year that the following year would be known as “The Panic of 2008,” adding that “giants (would) tumble to their deaths,” which is exactly what we have witnessed with the collapse of Lehman Brothers, Bear Stearns and others. He also said that the dollar would eventually be devalued by as much as 90 percent.

The consequence of what we have seen unfold this year would lead to a lowering in living standards, Celente predicted a year ago, which is also being borne out by plummeting retail sales figures.

The prospect of revolution was a concept echoed by a British Ministry of Defence report last year, which predicted that within 30 years, the growing gap between the super rich and the middle class, along with an urban underclass threatening social order would mean, “The world’s middle classes might unite, using access to knowledge, resources and skills to shape transnational processes in their own class interest,” and that, “The middle classes could become a revolutionary class.”

In a separate recent interview, Celente went further on the subject of revolution in America.

“There will be a revolution in this country,” he said. “It’s not going to come yet, but it’s going to come down the line and we’re going to see a third party and this was the catalyst for it: the takeover of Washington, D. C., in broad daylight by Wall Street in this bloodless coup. And it will happen as conditions continue to worsen.”

“The first thing to do is organize with tax revolts. That’s going to be the big one because people can’t afford to pay more school tax, property tax, any kind of tax. You’re going to start seeing those kinds of protests start to develop.”

“It’s going to be very bleak. Very sad. And there is going to be a lot of homeless, the likes of which we have never seen before. Tent cities are already sprouting up around the country and we’re going to see many more.”

“We’re going to start seeing huge areas of vacant real estate and squatters living in them as well. It’s going to be a picture the likes of which Americans are not going to be used to. It’s going to come as a shock and with it, there’s going to be a lot of crime. And the crime is going to be a lot worse than it was before because in the last 1929 Depression, people’s minds weren’t wrecked on all these modern drugs – over-the-counter drugs, or crystal meth or whatever it might be. So, you have a huge underclass of very desperate people with their minds chemically blown beyond anybody’s comprehension.”

The George Washington blog has compiled a list of quotes attesting to Celente’s accuracy as a trend forecaster.

“When CNN wants to know about the Top Trends, we ask Gerald Celente.”
- CNN Headline News

“Gerald Celente has a knack for getting the zeitgeist right.”
- USA Today

“There’s not a better trend forecaster than Gerald Celente. The man knows what he’s talking about.”
- CNBC

“Those who take their predictions seriously … consider Gerald Celente and the Trends Research Institute.”
- The Wall Street Journal

“Gerald Celente is always ahead of the curve on trends and uncannily on the mark … he’s one of the most accurate forecasters around.”
- The Atlanta Journal-Constitution

“Mr. Celente tracks the world’s social, economic and business trends for corporate clients.”
- The New York Times

“Mr. Celente is a very intelligent guy. We are able to learn about trends from an authority.”
- 48 Hours, CBS News

“Gerald Celente has a solid track record. He has predicted everything from the 1987 stock market crash and the demise of the Soviet Union to green marketing and corporate downsizing.”
- The Detroit News

“Gerald Celente forecast the 1987 stock market crash, ‘green marketing,’ and the boom in gourmet coffees.”
- Chicago Tribune

“The Trends Research Institute is the Standard and Poors of Popular Culture.”
- The Los Angeles Times

“If Nostradamus were alive today, he’d have a hard time keeping up with Gerald Celente.”
- New York Post

So there you have it – hardly a nutjob conspiracy theorist blowhard now is he? The price of not heeding his warnings will be far greater than the cost of preparing for the future now. Storable food and gold are two good places to make a start.

NDTV Profit is reporting today unconfirmed developments that the Real Esate King DLF is to borrow Rs 4000 crs to Rs 5000 crs from Cash Rich Dollar Billionaire,Malvinder Singh who sold his Ranbaxy stake for Billions of Dollars to Dai-ichi of Japan recently

The alarming note is not the quantum of Borrowing but the reported Interest Rate of 30% to 35% pa !

Taking Extremes,if this Borrowing goes through,DLF will be bearing a very high Interest outflow of a Minimum Rs 1200 crs (30% of Rs 4000 crs) to a maximum of Rs 1750 crs (35% of Rs 5000 crs)

This is simply crazy !…just reflects the reality that there is such a huge ongoing credit contraction and Corporates are simply not getting access to Big Scale Funds from regular financing sources of Banks and Institutions

The Realty Sector is facing a Demand Ebb on one hand and a Huge Life Threatening Credit Contraction on the Other…..A Further Fall across the Board in Real Estate Prices Nationwide seems inevitable in these circumstances

There will be big consolidation as smaller builders and developers who joined the Bandwagon in the past few years will have no alternative but to forcibly sellout as their financiers will exert even more pressure 

Shares Prices of Real Estate Scrips have already crashed over 90% from Highs this Year…How much more can they fall !…this will depend on the Quantum of Debt these Companies Carry and the extent of default in servicing it

My Blog has this Tag Line on the Home page

” In India,Companies may fall Sick,but Promoters rarely do !”

How do we get Retail Investors to come back into our Stock Markets  when we have self serving Promoters running Riot with Shareholders Funds !

Satyam joins this growing list of Companies where Promoters take for granted all shareholders and are purely self serving…Check out earlier Blogs today for their blatantly immoral and outright unethical decsion that Satyam would buy out Promoter stakes in Maytas Companies

Markets have been truly unforgiving to such Companies…..Gandhis of Lok Housing,Gaurs of Jaiprakash Group,Agarwals of Vedanta Sterlite Group have all felt the ire of Shareholders for self serving decisions taken by them that violate norms of Corporate Governance…Their Share Prices have collapsed this year from 60 % to 95 %….Shareholders have thrown out their holdings after losing trust in Promoters

Rajus of Satyam too are on track to face such a calamity even though they have reversed this controversial decision overnight…The Trust is gone overnight too !…From Rs 225 yesterday,Satyam has crashed over 25% to levels of Rs 165

Another Danger is that even existing clients that Satyam Serves will not trust this Company and it’s Promoters easily again…The Impact of this could be severe loss of Business and Growth Prospects…New Clients will not be forthcoming

Also Employees will move away,being demoralised and demotivated by such unethical behaviour from the Promoters

So we should see an immediate exodus of Shareholders first followed by Employees and Clients in Satyam

JOKE OF THE DAY

Satyam has won the Golden Peacock Global Award for Excellence in Corporate Governance for 2008…..This award was given recently on September 23, 2008

Relations Global Rankings (IRGR) rated Satyam as the company with Best Corporate Governance Practices for 2006 and 2007.

It also won the Golden Peacock Award for Excellence in Corporate Governance from the Institute of Directors in New Delhi in 2002

One thing is for Sure….Satyam is unlikely to win any such recognition awards in the Future  after Founder Chairman,B Ramalinga Raju blundered big time in announcing the Maytas Acqusition yesterday…It was seen as a Bail-out for his Sons !…Even though he reversed the Decision overnight the Damage had been done….Check out an earlier Blog today on this

Holding less than 10% of Satyam’s equity,Founder Chairman,B Ramalinga Raju,got a Board Resolution passed to buy out 51 % of the Equity in his Son’s Companies Maytas (Satyam spelled backwards !) Infrastructure and a 100% Stake in Maytas Properties for a whopping aggregate of US $ 1.6 Billion or nearly Rs 8000 crs !

As if Satyam’s Cash Reserves are his fathers properties to buy out those of his Sons  !

This is nothing short of a Financial Rape of All Shareholders of Satyam by it’s Promoters

Ramalinga became Ravana with just this one blatantly immoral and unethical announcement even though he has tried to justify it

Even though he reversed it overnight under severe Institutional pressure,he does not become Rama again !

What the hell were the Board of Directors doing when passing such an acquisition !?…Is there is no genuine Independent Director on Board !? Mr Raju says it was a unanimous Board decision

Have a look at the Satyam Board…There are Nine Directors,of which Five are designated as Independent and Non Executive Directors and include world reknown names of Vinod K Dham of Intel and Prof M RamMohan Rao,Dean of ISB….I do not know whether  these Directors were present at the Meeting that decided the Maytas Acquisition…The 2007/8 Annual Report states of Four Meetings held in 2007/8, Mr Dham attended one in person and participated through Video Conference in the remaining three …..so we can assume video conferencing facility continues in this Financial Year 2008/9 and that Mr Dham attended this crucial meeting too through Video Conference

Companies Act needs to be amended strongly to deny promoters holding such a low level of Shareholding (8.74 % in Satyam) to “siphon” off large funds of the Company (US $ 1.6 Billion or @ Rs 8000 crs ) through only a Board meeting without seeking shareholders approval through an EGM or at the AGM

Satyam has become Asatyam overnight and this morning it’s share price reacted 28% to drop to Rs 162

Shareholders were shell shocked and FIIs and Domestic Institutions were fast to condemn this moving out of cash of Rs 8000 crs from Satyam to it’s Promoters who own the Maytas Companies

Satyam is tarnished overnight and the trust lost in a day will takes years to regain,if at all…all because of Poor Corporate Governance and the daylight Robbery attempted to be committed by the Founder,B Ramalinga Raju also now known as Ravana

The basis for the US $ 1.6 Billion Valuation of Maytas Companies has not been disclosed,although Mr Raju came on TV and, was clearly uncomfortable when fielding questions, disclosed that a Big Four Accounting Firm’s help had been taken !….The Valuation is as huge as that of Unitech !…Could this Big Four Firm be it’s auditors,Price Waterhouse !?…if you recollect This same auditing Firm was banned by RBI for several years from auditing Banks after it’s disastrous Audit of Global Trust Bank where it failed to notice and therefore did not bring out the huge Financial Hole in the Listed Bank which led to it’s collapse.

Mr Raju,if you feel the IT Space is not where you want to put further monies,then why don’t you return Cash Reserves to Shareholders as Dividends which are Tax exempt in their Hands !?

In 2000,it was my firm belief then that, Satyam Infoway (SIFY)  overpaid for another acquisition of Rajesh Jain’s IndiaWorld when it paid US $ 116 Million in a cash and stock deal….there was strong suspiscion at the time that probably some of this money paid found it’s way back !

Shareholders should get out of both,Satyam and Maytas Infrastructure …Both will sink further as it becomes clear and is established that this was not just a Diversification planned by Satyam,but it was a blatant bailout attempt by a Father of His Sons 

Mr Raju,even if you felt diversification into Construction was a good strategy to derisk Business from core IT Space…two questions that simply reveal your malafide intentions….

Why Invest so heavily in your own Family and Friends Maytas Companies ?……You say Maytas holds 6800 acres of Landback and also has an order book position of US $ 2.5 Billion….but is this not true that you are referring to this order……Maytas has bagged the Rs 12000 crs Hyderabad Metro Link Contract….It is finding it difficult to raise Monies to execute this

Why a Secondary Deal ? ……. You could have infused fresh equity in Maytas so that monies went to the Companies instead of buying out your family and friends’s stakes  and thereby routing Satyam’s Cash directly into their hands ?

Mr B Ramalinga Raju, you’re a Goner !

Just a last point…it’s just a coincidence that another Raju,K S Raju,the Industrialist Doyen from Andhra Pradesh who heads the Nagarjuna Group of Companies,has been arrested and remanded to judicial custody till December 29,2008 alongwith another of his Directors,PK Mahadevan…the charge is that one of his Companies,Nagarjuna Finance has defaulted in repaying over Rs 100 crores of Fixed Deposits placed by the public and shareholders in it. 

Phew !…just stay away from AhmedaBAD and HyderaBAD companies !…Most Listed Companies from here are formed and run purely to serve the interests of promoters…for the Promoter,by the Promoter and Of the Promoter…..with an exception here and there

An interesting news article in today’s Financial Express caught my eye….Russia’s Central bank devalued the Rouble for the second time in a week  

As 2008 began,Russia was flexing it’s economic muscle  and being touted as the next big super earner from surging Oil Prices to US $ 145/barrel…It had already began licking it’s lips in eager and exciting anticipation of surging  Revenues from Oil Exports

Within Months the Fairy tale Speculative Bubble rise in Oil Prices burst and Oil is now under US $ 50

This has taken a toll on Russia’s Currency…the Rouble…..For a straight ninth day it has depreciated against the Euro and it is now quoted at a four year low of 37.55 per euro

Russia’s Central Bank has already devalued the Rouble twice this week…It has already depleted it’s Fx Reserves by a huge US $ 161 billion or 27% to counter the 16% depreciation since August this year of the Rouble against the US Dollar as a consequence of Oil Prices crashing 69% from Highs

I vividly recollect 1991/92 and the open float of the Rouble and it’s consequent crash against the US Dollar by a factor of over 20 

In fact a leading Indian Investment Magazine had carried a blatant Editorial in it’s July 1992 Issue that just said “BUY HEAVILY”…not because of their   concluding that markets had bottomed out after correcting on the Harshad Mehta BR Scam exposed in April 1992 (They had not),but on the basis of the fact that they strongly opined that the Russian Rouble was to be floated and would crash significantly… Therefore our Russian Defence Debt of around Rs 50000 crs would be restated to probably just Rs 50 Crs !

This was poppycock !…the Bilateral Agreement between India and Russia clearly stated that the Indian Rupee to Rouble Exchange Rate would be fixed under all circumstances…If I remember correctly it was One Rouble to Rs 37…So there was no question of any restatement of Liabilities downwards

Stock Markets,reeling under the Harshad Scam, were looking at straws to revive and took this Wrong Editorial as one and there was renewed buying…even some of my clients at the time went against our advice…..1992 closed much lower.

Exchange Rates can play havoc…Currency Rate Volatility exposes risks that need to be proactively managed by hedging.  

India too has been hit in recent months by a 25% sudden depreciation in the Indian Rupee against the US Dollar…It was seen strong at US $/Rs 39 and expected to get stronger….but it retraced fast to US $/Rs 49…Normally Exporters would have loved and welcome and celebrated this…but they had already forward booked at US $ 42…Importers expecting more Rupee Strength at Rs US $/35 had not forward booked and have now got to pay heavily more for a further weakened rupee…The Value added Export Diamond Sector has been  greatly affected…check out how in my earlier Blog on this Industry

RNRL and Reliance Infrastructure,both Anil Ambani Group Companies have reacted sharply on headline news in the Economic Times that Enforcement Directorate are investigating the misuse of ECB/FCCB Funds in their UBS Bank Accounts in London.

Click on the Link below to read the full story 

http://epaper.timesofindia.com/Daily/skins/ET/navigator.asp?Daily=ETM&login=default 

So what’s New ?….It is well known that it’s either Monies of Indians lying undisclosed outside India or Indian Monies that are routed out of India through Havala that come back in as legitimate FII Investments through the rampant misuse of Participatory Notes…Diamond Dealers Network is used as they are easy facilitators

Who are the lenders to RNRL and Reliance Infra of these ECB/FCCB Funds ?…for all you know these too may  just be routed funds….as there is RBI strictures on end use you cannot afford to link these funds directly to Stock Market Manipulation of Share Prices…so with bank connivance you take overdrafts and route those funds through PNs and FIIs  

Remember how Lok Housing Collapsed from Rs 450 in January 2008 to fall below Rs 20…Check out earlier Blogs on Lok Housing…..In July 2008 we knew why this happened ……because Income Tax Authorities had been investigating it for Months and only disclosed the Income concealment of Rs 400 crs and tax evasion of Rs 100 crs in July 2008…those who knew beforehand of this Investigation surely misused this sensitive undisclosed news to make some inside money

Well….Share Prices of RNRL and Reliance Infra too have been demolished on the Stock Exchanges…Maybe SEBI could invetigate to try and establish a link between the sharp fall in Share Prices and the inside knowledge of such sensational news as the ED Investigation disclosed by ET today

Yesterday was a Sunday and we were at the Bhartiya Kreeda Kendra,Wadala in Central Mumbai for the full day to witness the Team Championships of the Inter School Gymnastics Competition…Our Daughter was leading her School and they won Gold

While awaiting the Prize Distribution in the evening ,we,along with other parents, had occupied a few chairs at the back in the Huge Ground which was playing Host to the Annual Gathering of a particular Community Sect from a specific area in the State of Rajasthan and who had made Mumbai their Home 

There were over 1000 people of this Community Sect who trooped in eventually…Suddenly there was an announcement in Hindi which translates as below

” The Mother and Father of this Child are Lost ! Can they come and collect the Child who is with the Announcer,near the Stage “

We just fell off our seats laughing !….Hilarious !….Was the Child Lost or were his Parents Lost ! ? We thought the Announcer was tickling and teasing all of us…but the guy was dead serious.

Of course we got the Point…The Lost Parents were finally Found !  

This opinion by Farrukh Dhondy on BBC getting it all wrong in today’s edition of DNA got me to check out as to what exactly is the Difference between ‘MILITANT’ and ‘TERRORIST’…Ironically I have referred to the Oxford English Dictionary

‘MILITANT’ is an adjective that means ‘supporting a cause in a forceful and confrontational way’ 

‘TERRORIST’ is a noun and means ‘person who uses violence and intimidation in an attempt to achieve political aims’

BBC has told it’s panelists and anchors not to use the word ‘TERRORIST’ but to say   ‘MILITANT’ instead when commenting on the recent Terrorist Strike in South Mumbai

I agree wholeheartedly with Dhondy….Methinks BBC needs a Brain Surgery…make that a Brain Transplant !

The Ten who came in by sea one Wednesday night in the last week of November 2008, audaciously attacked South Mumbai,firing indiscriminately and hurling grenades and placing RDX Bombs that killed nearly 200 innocent civilians and injured more than 300

Nine of the Ten were killed by Indian Security Forces and one was arrested…he has revealed that they had orders to kill 5000 Soft Targets and spread Fear and Panic !

Yet BBC wants us to call them ‘MILITANTS’ and not ‘TERRORISTS’ !

Is BBC the UK Government Stance too ? is this their way of appeasing Muslims in the UK who support the Kashmir Cause and who otherwise might have got alienated ?

Cause or No Cause! When you deliberately kill Soft targets of Civilians that include women and Children,you are nothing but a ‘TERRORIST’!…you’ve crossed that Thin Line in the Definitions.

Is our 26/11 any different from USA’s 9/11 except in scale !?…You rightly called Osama a Terrorist for 9/11…Now BBC,why are you applying a diffrent yardstick for the same nature of Crime for India’s 26/11 ?…Methinks you have a cause too…with a political aim…and this dictum of yours is clearly an intimidation…so should I label you too, BBC, as a TERRORIST !

And one more thought…BBC,why stop at your softening stance from ‘TERRORIST’to ‘MILITANT’ ! Go the whole hog and label these ‘TERRORISTS’ as ‘FREEDOM FIGHTERS’

And to conclude…I’m not sure what you would have called our Netaji Subhash Chandra Bose  in your Language..a ‘MILITANT’or a ‘TERRORIST’?…To us he was a ‘FREEDOM FIGHTER’ who used Non Gandhian means