Thursday, January 08, 2009

The Simple Explanation to What Happened at Satyam

Everyone is asking the question: What happened to Satyam's Rs 5,400 crore cash that was on the books. Amid all the hype, here's the simple story.

Ramlinga Raju found a way to give Rs 5,400 crore to his son's real estate companies Maytas Infrastructure and Maytas Properties. This money had already been siphoned out before the declaration that Satyam was buying out the two Maytas companies.

However, the shareholder revolt that followed forced Ramlinga Raju to cancel the buyouts. But the money had already been transferred out.

The other simple story: Satyam had been fudging figures for years. There was no substantial cash in any case. The only way to show this cash as spent, was to acquire Maytas and show is as an asset purchased for the cash.

This way cash from reserves would be shown as investments or cash paid for aquisition.

Either way, Ramlinga Raju screwed up.




Consider how the crisis has unfolded over the past eighteen months. The proximate cause is to be found in the housing bubble or more exactly in the excesses of the subprime mortgage market. The longer a double-digit rise in house prices lasted, the more lax the lending practices became. In the end, people could borrow 100 percent of inflated house prices with no money down. Insiders referred to subprime loans as ninja loans—no income, no job, no questions asked. - George Soros in latest book

everything’s going up, there’s a feelgood factor and people tell each other how much their houses are going up at dinner parties,” says Professor Mark Stephens of York University’s Centre for Housing Policy. “Then the music stops, as it always does.”

year, Japan was a more attractive market to put money in. If you look at the US, we can now get an internal rate of return of 25% there, so why would anyone want to come to India?” - a senior executive at an international financial services group, who did not wish to be named.

people told us house prices never go down on a national level, and that there had never been a default of an investment-grade-rated mortgage bond, "Mortgage experts were too caught up." - John Paulson, trader, who bet against subprime market and made $15 billion.

most puzzling are the real-estate projects of Parsvnath. Just have a look at the Pride Asia project near Chandigarh. They are asking almost US $300K-$350 K dollars for 2 bed room apartments. They have Villas in this project that costs more than US $1.5 million dollars. It is true that some people in India have that kind of money in India. However most of their wealth is black money and that can not be used to buy these properties. Obviously, these projects have been launched keeping NRIs in mind. - Sanjeev, comment from another site

Desai, aka Bani, the star of Balalji Telefilms's soap, Kasam Se, has been house hunting for over a year. She had almost closed a 2-BHK deal last year for Rs 1.5 crore in a Oberoi Constructions' building located at Andheri, Mumbai, but when she went back to confirm it, she was asked to cough up Rs 2.61 crore. Since then, she is still house hunting. - Mumbai Mirror


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