Raju family throws googly at Tech Mahindra-Satyam merger

Despite shareholders approving the merger of Tech Mahindra with Satyam, the proposed deal is not going to be a smooth one. The family of B Ramalinga Raju, the Satyam founder who admitted to the Rs 14,000 crore accounting fraud at the IT firm, is now contesting the merger on grounds that the company accounts have not been properly restated and that Satyam owes them Rs 1,230 crore.

The Raju family’s objection is that the Rs 1,230 crore should reflect as liabilities of Satyam and provision must be made for the repayment of it. “If Satyam were to merge into Tech Mahindra, all the liabilities of Satyam must be passed onto Tech Mahindra, so that the rights of all the stakeholders, including the creditors, are protected,” Economic Times reported, quoting the family’s lawyer S Niranjan Reddy.

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And now the company’s former sister-concerns IL&FS Engineering and Maytas Properties have also raised concerns over the lack of acknowledgment that Mahindra Satyam showed, in representing them as creditors. The infrastructure firm has moved the Andhra Pradesh high court saying that the new owner, Mahindra Satyam has turned a blind eye to the Rs 650 crore IL&Fs had lent to Satyam, when Raju was the chairman. It argued that when the company was managed by Ramalinga Raju, funds to the tune of Rs 390 crore from IL&FS and Rs 270 crore from Maytas Properties were transferred to the then Satyam Computers. Raju was the promoter of Maytas at the time and his elder son Teja Raju was at the helm at Maytas when the scam broke out in January 2009.

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IL&FS Engineering took over Satyam affiliate Maytas Infra Ltd before Satyam founder Raju confessed to having mis-stated the company’s accounts to the tune of Rs7,136 crore. After the scam broke out, Mahindra bought Satyam and Maytas went to IL&fs. “While both the new managements did their own audit exercises in the companies, IL&FS found out pilferage in the accounts and claimed that the funds were diverted into Satyam during the regime of the Rajus,” said a DNA report.

“They have represented to the court that they have no unsecured creditors in our firm. It is factually untrue,” G. Venkateswar Reddy, company secretary of IL&FS Engineering, said at the company’s AGM on Friday.

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Tech Mahindra bought Satyam Computer, later rebranded as Mahindra Satyam, at an auction overseen by government-appointed directors in April 2009 after the Hyderabad-based firm was hit by India’s biggest accounting scandal. The boards of the two companies approved a swap ratio of two Tech Mahindra shares (face value of Rs 10 each) for every 17 held by Satyam shareholders (face value of Rs 2 each).

However, on Friday some minority shareholders of Satyam Computer Services protested against the share swap ratio they were offered in the proposed merger with Tech Mahindra. Some retail investors felt that they should have waited till 2014 so that the company’s performance turned positive, improving the share value. But the company declared that 6.51 percent votes approved the merger while 0.29 percent of the total share of voters were against it.

The merger will enable the M&M group’s technology firm to become the sixth biggest software giant after other bigwigs including TCS, Infosys, Cognizant, Wipro and HCL Technologies.