satyam ramalinga raju latter to .....

To the Board of Directors

Satyam Computer Services Ltd.

From B. Ramalinga Raju

Chairman, Satyam Computer Services Ltd. January 7, 2009

Dear Board Members,

It is with deep regret, and tremendous burden that I am carrying on my conscience, that I would like to bring the following facts to your notice:

1. The Balance Sheet carries as of September 30, 2008

a. Inflated (non-existent) cash and bank balances of Rs 5040 crore ($1.04 billion) (as against 53.61 billion reflected in the books).

b. An accrued interest of Rs 376 crore which is non-existent.

Ramalinga Raju admits to Rs 5,040-cr fraud

c. An understated liability of Rs 1230 crore on account of funds arranged by me.

d. An overstated debtors position of Rs 490 crore (as against 26.51 billion reflected in the books)

2. For the September quarter (Q2) we reported a revenue of Rs 2700 crore and an operating margin of Rs 649 crore (24 pct of revenues) as against the actual revenues of Rs 2112 crore and an actual operating margin of Rs 61 crore (3 per cent of revenues). This has resulted in artificial cash and bank balances going up by Rs 588 crore in Q2 alone.

The gap in the Balance Sheet has arisen purely on account of inflated profits over a period of last several years (limited only to Satyam standalone, books of subsidiaries reflecting true performance). What started as a marginal gap between actual operating profit and the one reflected in the books of accounts continued to grow over the years.



It has attained unmanageable proportions as the size of company operations grew significantly (annualised revenue run rate of Rs 11276 crore in the September quarter, 2008, and official reserves of Rs 8392 crore).

The differential in the real profits and the one reflected in the books was further accentuated by the fact that the company had to carry additional resources and assets to justify higher level of operations -- thereby significantly increasing the costs.



Every attempt made to eliminate the gap failed. As the promoters held a small percentage of equity, the concern was that poor performance would result in a take-over, thereby exposing the gap. It was like riding a tiger, not knowing how to get off without being eaten.

The aborted Maytas acquisition deal was the last attempt to fill the fictitious assets with real ones. Maytas' investors were convinced that this is a good divestment opportunity and a strategic fit. Once Satyam's problem was solved, it was hoped that Maytas' payments can be delayed. But that was not to be. What followed in the last several days is common knowledge. I would like the Board to know:

Credit Suisse suspends coverage of Satyam

1. That neither myself, nor the Managing Director (including our spouses) sold any shares in the last eight years -- excepting for a small proportion declared and sold for philanthropic purposes.

2. That in the last two years a net amount of Rs 1230 crore was arranged to Satyam (not reflected in the books of Satyam) to keep the operations going by resorting to pledging all the promoter shares and raising funds from known sources by giving all kinds of assurances (Statement enclosed, only to the members of the board).



Significant dividend payments, acquisitions, capital expenditure to provide for growth did not help matters. Every attempt was made to keep the wheel moving and to ensure prompt payment of salaries to the associates. The last straw was the selling of most of the pledged share by the lenders on account of margin triggers.



3. That neither me, nor the Managing Director took even one rupee/dollar from the company and have not benefitted in financial terms on account of the inflated results.

4. None of the board members, past or present, had any knowledge of the situation in which the company is placed. Even business leaders and senior executives in the company, such as, Ram Mynampati, Subu D, T.R. Anand, Keshab Panda, Virender Agarwal, A.S. Murthy, Hari T, S.V. Krishnan, Vijay Prasad, Manish Mehta, Murali V, Sriram Papani, Kiran Kavale, Joe Lagiola, Ravindra Penumetsa; Jayaraman and Prabhakar Gupta are unaware of the real situation as against the books of accounts. None of my or Managing Director's immediate or extended family members has any idea about these issues.



Having put these facts before you, I leave it to the wisdom of the board to take the matters forward. However, I am also taking the liberty to recommend the following steps:

1. A task force has been formed in the last few days to address the situation arising out of the failed Maytas acquisition attempt. This consists of some of the most accomplished leaders of Satyam:, Subu D, T.R. Anand, Keshab Panda and Virender Agarwal, representing business functions, and A.S. Murthy, Hari T and Murali V representing support functions. I suggest that Ram Mynampati be made the Chairman of this task force to immediately address some of the operational matters on hand. Ram can also act as an interim CEO reporting to the board.



2. Merrill Lynch can be entrusted with the task of quickly exploring some Merger opportunities.

3. You may have a restatement of accounts' prepared by the auditors in light of the facts that I have placed before you.

I have promoted and have been associated with Satyam for well over twenty years now. I have seen it grow from few people to 53,000 people, with 185 Fortune 500 companies as customers and operations in 66 countries. Satyam has established an excellent leadership and competency base at all levels. I sincerely apologize to all Satyamites and stakeholders, who have made Satyam a special organization, for the current situation. I am confident they will stand by the company in this hour of crisis.

In light of the above, I fervently appeal to the board to hold together to take some important steps. T.R. Prasad is well placed to mobilise support from the government at this crucial time. With the hope that members of the Task Force and the financial advisor, Merrill Lynch (now Bank of America) will stand by the company at this crucial hour, I am marking copies of this statement to them as well.

Under the circumstances, I am tendering my resignation as the chairman of Satyam and shall continue in this position only till such time the current board is expanded. My continuance is just to ensure enhancement of the board over the next several days or as early as possible.

l am now prepared to subject myself to the laws of the land and face consequences thereof.

(B. Ramalinga Raju)

Copies marked to:

1. Chairman SEBI

2. Stock Exchanges

DLF goes deep into the hole, Crisil lowers Ratings with a finger on further downgrades

DLF goes deep into the hole, Crisil lowers Ratings with a finger on further downgrades

DLF, the country's largest real estate company, today said that it has deferred several residential, hotel and commercial projects and retrenched an unspecified number of staff due to the lack of demand for housing.

DLF Chairman K P Singh said the real estate sector would witness massive job losses unless steps were taken to boost housing demand by reducing the rate of interest on home loans to around 7 per cent.

Singh said the real estate sector supports the livelihood of many people and stalled projects meant people will lose their jobs. He added that his company may have laid off some people, but did not give any numbers. Other developers like Unitech and Parsvnath Developers are also reported to have retrenched staff in the recent past.

Singh's remarks, made on the sidelines of the India Economic Summit organised by the World Economic Forum, come at a time when there are reports of real estate firms laying off employees, as part of their cost-cutting drive.

Developers have been facing liquidity crunch for over a year now. One of the reasons for this is the high risk weightage for bank loans to real estate and the ban on them from borrowing funds overseas.

However, the government has asked developers to slash prices of their projects to boost demand in the sector. Singh said the lack of demand has already led to lower prices.

Meanwhile, Crisil has lowered its rating on DLF's non-convertible debenture programme and long-term bank facilities to AA-/Stable from AA/Stable. The rating agency said the revision was prompted by a weakening of the company's debt protection measures and higher-than-expected gearings.

The weakening was on account of higher debt funding of receivables from DLF Assets (DAL) and increased payments made for land.

The rating agency said it may revise its outlook on DLF to 'negative' if the receivables from DAL increase significantly beyond current levels. Conversely, the outlook may be revised to 'positive' if there is a significant improvement in the company’s capital structure and debt protection measures.

Crisil's rating derives support from the company’s policy of reducing its gearing to about 0.5 times. "These rating strengths are partially offset by the risks and cyclicality inherent to the real estate sector, DLF’s aggressive plans of diversification into non-real-estate businesses, and the high levels of receivables from DAL," said Crisil.

GVK POWER and Infrastructure (GVKPIL) is planning to divest 25% stake in its energy vertical.

GVK POWER and Infrastructure (GVKPIL) is planning to divest 25% stake in its energy vertical.

The company is in talks with some global private equity funds and a European bank for the proposed deal, which is valued at around $500-700 million. “We have got five confirmed term-sheets from four global private equity funds and one foreign bank. We hope to sew up the deal with one of them after our power plants commence operations by the year-end,” said a top official of the company who did not wish to be named. A term-sheet is a non-binding agreement setting forth the basic terms. The company is waiting for gas supplies from Mukesh Ambani-led Reliance Gas Corporation for two of its power plants in the state. “We will settle the transaction once the Vemagiri and Gautami power plants in east Godavari district start generating power,” said the official. Currently, these two power plants are lying idle. Reliance Gas Corporation has entered into an agreement with GVKPIL to supply 8.94 million cubic metres of gas per day for the gas-based power plants in Andhra Pradesh. The Mumbai-based company would be producing 40 million cubic metres per day of gas in the first phase. GVK Power & Infrastructure, an arm of the GVK group, has diversified businesses. It has a focus on infrastructure and urban infrastructure projects, besides interests in the hospitality, services and manufacturing sectors. The company owns, operates and maintains power plants by itself and through its subsidiaries. In February 2008, the GVKPIL incorporated GVK Energy as its wholly-owned subsidiary. Later, the company acquired both GVK Energy and GVK Developmental Projects.

Indian shares tumble for second session in a row; ICICI Bank leads declines

Indian shares tumble for second session in a row; ICICI Bank leads declines

Indian shares extended losses for the second session in a row Monday, tumbling nearly 4 percent on fears that the credit crisis may take its toll on the European financial institutions, after the collapse of large U.S. banks.
EUROPEAN BANKS HIT BY THE CREDIT CRISIS
Credit crisis fears returned on Monday, as the European states took steps to rescue the nations' lenders from the event of bankruptcy. The Belgian, Dutch and Luxembourg governments saved financial firm Fortis over the weekend to prevent a domino-like spread of failure. The UK government said lender Bradford & Bingley Plc's branch network will be sold to Spanish bank Santander and the remainder of the group will be nationalised.
Moreover, Iceland's government bought a 75 percent stake to take control of Glitnir Bank after the lender's funding position deteriorated. German lender Hypo Real Estate Holdings A.G. struck a last-minute deal with the government and a consortium of banks to resolve a refinancing squeeze.
MARKET COLLAPSES TRACKING EUROPEAN CUES
The Bombay Stock Exchange's benchmark 30-share Sensitive Index plunged 506.43 points or 3.87 percent to 12,595.75, recovering from the day's low of 12,402.84 points, it's lowest in a year and a half. The 50-share S&P CNX Nifty of the National Stock Exchange sank 135.20 points or 3.39 percent to 3,850.05.
Weak opening among the European indices and the UK government's announcement of Bradford triggered panic-selling in the banking and realty shares, which later spread across the counters.
'The market recovered by some points later, as insurance companies bought on the shares at lower levels later in the day,' said a dealer at a Mumbai-based brokerage.
At the close, all the 30 benchmark equities which constitute the Sensex declined except consumer goods giant Hindustan Unilever Ltd., which gained 0.8 percent to 254.50 rupees.
No. 1 private lender ICICI Bank Ltd. led the declines, sliding 12.1 percent to 493.30 rupees. The lender came up with a statement in the mid-market hours that its UK subsidiary has no exposure to U.S. sub-prime credit and that 98 percent of its non-India investment book of $3.5 billion was 'rated investment grade and above.'
Top engineering company Larsen & Toubro Ltd. dipped almost 5 percent to 2,345.35 rupees and no. 2 software company Infosys Technologies Ltd. slipped 3.85 percent to 1,391.95 rupees.
All 13 BSE sector indices declined, with the banking index being the worst hit. The gauge of 16 lenders tumbled 6.02 percent, and is off 34.8 percent since Sept. 28, a year ago.
About 263.9 million shares changed hands in the broader market, as 357 advancers trailed 2,287 decliners.
Forty-six of the 50 Nifty shares declined, led by world's fifth largest wind turbines maker Suzlon Energy Ltd. as it pared 12.4 percent to 153.50 rupees. State-run oil refining and marketing company Bharat Petroleum Corp. Ltd. (BPCL) gained the most as it rose 1.8 percent to 341.10 rupees on the National Stock Exchange, which recorded 555.1 million trades.

Q: What is your take on the kind of damage that we are seeing in a lot of largecap names like ICICI Bank and Unitech? Do you think they are getting oversold or there are legitimate reasons for these kinds of sharp falls?

Kapoor: To some extent, there is panic both in the real estate sector as well as in ICICI Bank if we take that specific name. The reasons are that in real estate, a lot of foreign money or private equity money had come in and all these institutions are finding themselves in problems. Real estate prices have the potential to go down much more than they have in the last one year or so.

So, that explains this panic in real estate stocks. ICICI Bank, in terms of valuations et cetera is at a very good price at this point to accumulate. But in a panic state, markets can become very irrational as they can become in a very bullish market.

So, one really cannot put a bottom to it. But at every decline, ICICI Bank is a stock that one can accumulate, but very gradually and carefully because we don’t know where this bottom will finally happen.

---dggopi4u

KSK Energy Ventures Ltd Ipo

Power producer KSK Energy Ventures Ltd. plans to raise a maximum of 12.98 billion rupees through an initial public offering and a pre-IPO share placement.

The price band for the 34.611-million-share initial public offer, that opens on June 23 and closes on June 25, has been set at 240 rupees to 255 rupees per share, banking sources said.

Its promoter, London-listed KSK Power Ventures , on Friday said it issued 17.306 million shares to a clutch of institutions including Macquarie Bank, Infrastructure Development Finance Co , Axis Bank and GE Capital, at 240 rupees each, raising 4.15 billion rupees.

KSK Power Ventures, a company listed on the AIM market of London Stock Exchange, today said its Indian subsidiary has raised Rs 415.34 crore through an pre-IPO placement.

KSK Power said its subsidiary KSK Energy Ventures, has successfully completed a pre-IPO placement of 1.73 crore equity shares at a price of Rs 240 per share, a company statement said.

The company has issued shares to six financial institutions including Macquarie Bank (UK), Tree Line Asia Master Fund, Infrastructure Development Finance Company, Axis Bank, Universities Superannuation Scheme, UK and GE Capital (Mauritius).
After the big let-down for investors by Anil Ambani's Reliance Power, a little known company, KSK Energy Ventures Ltd, with negligible experience in the power sector is planning to raise around Rs 2,000 crore through an IPO. When one of the largest industrial houses in the country could not reward its IPO subscribers with good returns post-listing, it has to be seen how this issue fares on listing


KSK Power Ventur plc is India focused Power project development and Investment Company listed on Alternate Investment Market (AIM) of the London Stock Exchange.
KSK operates across India through its fully owned subsidiary, KSK Energy Ventures Limited.
KSK Power Ventur plc is a power project development company listed on Alternate Investment Market (AIM) of the London Stock Exchange. KSK operates in India through its fully owned subsidiary, KSK Energy Ventures Limited (KSKEV). Its operations in the Indian Power Sector are powered by the growth opportunities it realizes and capitalizes on. An affiliate of Lehman Brothers of USA has 33.5% stake in KSKEV.

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