Satyam fraud jeopardises its projects in Andhra Pradesh

HYDERABAD - The near Rs.7,000-crore (Rs.70 billion or $1.4 billion) financial fraud involving Satyam Computer has jeopardised infrastructure projects the firm’s promoters had contracted in Andhra Pradesh, which includes the prestigious Hyderabad Metro rail project.

Maytas Infra, the company promoted by Satyam chairman Ramalinga Raju’s son B. Teja Raju, was awarded the Rs.122-billion (Rs.12,200 crore or $2.5 billion) Hyderabad Metro Rail and the Rs.16-billion (Rs.1,600-crore or $330 million) Machilipatnam Deep Water Port projects by the state government.

Post-scam, the government will likely terminate both the contracts and invite fresh bids, government officials said.

Other projects awarded to Maytas may also come under scrutiny. For instance, a Rs.8.1-billion sub-contract in a Rs.33.75-billion project to bring Godavari river water to Hyderabad.

Ramalinga Raju Wednesday quit as Satyam chairman after admitting to cooking up accounts, which shocked corporate India and crashed the company’s stock value.

The crisis was triggered by Satyam’s Dec 16 decision to acquire Maytas Properties and Maytas Infra for $1.6 billon (Rs.79.2 billion or Rs.7,920 crore). The next day, Satyam called off the deal after institutional investors revolted, saying it amounted to dipping into Satyam’s cash reserves to bail out the cash-starved Maytas firms.

After Raju’s admission, the state government asked Chief Secretary P. Ramakanth Reddy to look into Maytas’ financial position and ascertain if it was in a position to execute the projects.

Incidentally, Chief Minister Y.S. Rajasekhara Reddy had earlier said the developments surrounding Satyam would have no impact on the two projects as Maytas was a separate entity.

Maytas, which is Satyam spelt in the reverse, is also executing several packages in major irrigation projects worth Rs.14 billion. The infrastructure company is also building at least three IT Special Economic Zones (SEZs) and integrated townships in Hyderabad.

Government officials said it would not be difficult to terminate the Metro Rail project as no land has been transferred to the company. Under the concession agreement signed last year, the government promised to allot 296 acres of prime land to the Maytas-led consortium for commercial exploitation.

In a move that raised many eyebrows, especially among international bidders, Maytas also declined to take a single penny from the government though the latter offered Rs.23.63 billion or 20 percent of the project cost under Viability Gap Funding (VGF) scheme. The firm also promised to pay Rs.303.11 billion over the concession period of 35 years, and paid Rs.110 million as advance.

The deal had come under criticism from E. Sreedharan, managing director of Delhi Metro Rail Corp.

Sreedharan, who served as a consultant to the Hyderabad Metro project, has said providing ‘296 acres of prime land to BOT developer for commercial exploitation was like selling the family silver’, and felt the land concession could lead to a ‘big political scandal some time later’.

Taking strong objection to Sreedharan’s comments, the Congress government in the state had asked him to apologise or face defamation charges.

The botched attempt by Satyam last month to acquire Maytas Infra triggered speculations that the move was aimed at infusing capital in Maytas as it was not in a position to mobilise funds for the project.

For the Machilipatnam port project, the state government has already transferred 412 acres of the land to Maytas. The company has been promised 6,262 acres for the project, the foundation stone of which was scheduled to be laid in April.