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Economic Crisis & Satyam Saga : Boon or Bane for India

It may sound cruel to say this, but the current economic crisis in the West might have brought some unintended benefits to India. This is best illustrated by the case of Satyam. Former chairman Ramalinga Raju has already confessed to having cooked the books, and shown vastly inflated profits and cash. 

This confession letter was sent on January 7 to his Board as well as the whole world. The letter came two weeks after an aborted attempt by him and his Board to inject $1.6 billion of Satyam’s cash into a real estate company owned by his family. Investors were upset, and unleashed their fury by selling Satyam stock, destroying several billion dollars of stock value. 

Hastily, the company reversed its decision. Subsequently, we learnt that Raju and family had pledged their Satyam shares for huge loans, possibly to make investments in real estate. As the stock market crashed, Satyam shares crashed too. And since these shares were kept as collateral with lenders, they wanted more collateral from Raju and family. Or just cash. Nothing was forthcoming, and hence lenders were forced to liquidate the collateral (which was already degraded in value).

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Tushar’s main goal is to spot good news-worthy info and get it out to the public as soon as possible. He has been writing about Personal Finance and Investing in India for the last 3 years. You can reach him at: tushar@allindiatoday.com

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