Satyam-IndiaWorld deal to be probed
Satyam’s fiasco can potentially open a pandora box and SEBI is going to probe all of the M&A deals and buybacks made by Satyam.
The most prominent being Indiaworld – Satyam paid Rs. 499 crores for the company (founded by Rajesh Jain):
In 1999, the group shocked investors when one of its units, Satyam Infoway, paid Rs5bn ($104m) for IndiaWorld, a little-known dotcom company. The price represented a multiple of 50 times IndiaWorld’s annual revenue of Rs10m and 2,000 times its net profit of Rs250,000. [FT]
Official sources said the 2000-01 acquisitions – notably the high-profile purchase of web portal India World Communications from Rajesh Jain for Rs 499 crore – by Satyam Infoway could mark the start of the company siphoning funds overseas under the guise of acquiring companies.
..the purchases coincided with the eight-year period for which the data has been fudged. The inspection report by the Serious Fraud Investigation Office and Sebi will be handed over to the enforcement directorate under the finance ministry to investigate the parking of funds overseas.[BS]
Essentially, the question is on valuation – India World at the time had a capital of Rs 20 lakh, so at Rs 499 crore for the buyout, each Rs 10 share was valued at a staggering Rs 2,500!
will the Rajesh also probed ? here
dont mix $ with Rs..
@Eldo, and that’s why the conversion is mentioned.
Its imp to note that the txn happened earler..with some $/Rs conversion..
you might be interested in reading rajesh jain’s blog.. nice article abt IndiaWorld.. ( http://archives.emergic.org/collections/the_indiaworld_story.html )
and a case study on the acquisition.. http://www.icmrindia.org/casestudies/catalogue/Finance/FINC031.htm
@Vishal Nagota, read comments here as well.. http://emergic.org/2009/01/08/a-satyam/#comments
Funny Side of Web !
check out rajesh’s blog “emergic” with post on the fiasco….hilarious is the fact that readers are discussing the sify – india world deal in the comments (probably without knowing its his own blog, though the page title says, rajesh jain’s blog, cant miss that, and they are referring him by name in the comments )
http://emergic.org/2009/01/08/a-satyam/