As the Metro rail gets set to be commercially launched, Maytas is part of Hyderabad's unsavoury history.

How Satyams Ramalinga Raju was derailed by the Hyderabad Metro RailImage: PTI
news Controversy Sunday, November 26, 2017 - 15:48

As the Hyderabad Metro rail gets ready to chug on November 28, with Prime Minister Narendra Modi as its first official passenger, a gentleman in Jubilee Hills would wince at the sight of the visuals that would be aired live on television.

For it was the Metro Rail project in the city that played an important part in exposing Ramalinga Raju, chairman of Satyam Computers, close to nine years ago. For all you know, if it had not been for his audacious decision to bid for the Hyderabad Metro rail project and win it, Raju's journey may never have been derailed and he would still have been the toast of India Inc.

It was sometime in April 2008 that Raju logged on to the metro rail project (pegged at that time at Rs 12,212 crore) even though his group had no expertise in executing a project of this size. It was no surprise that eyebrows went up and Hyderabad started speaking in hushed whispers about why the IT giant was venturing into an alien space. To negate criticism, Ital Thai, that had built the Bangkok metro was roped in to become part of the Navbharat-Maytas consortium. Maytas (Satyam spelt in reverse), floated as a construction and real estate entity, was run by Raju's sons. 

But it was when Raju beat the others during the bid process that those in the know, began to understand what was going on in the IT czar's mind. When the bids were opened in July 2008, Maytas won the bid by offering to pay Rs 1,350 crore to the government as license money for being awarded the project. This was completely out of the blue for the others had in contrast, sought Viability Gap Funding from the Union government. Anil Ambani's Reliance Energy had asked for Rs 2,811 crore while the Essar group wanted Rs 3,100 crore. 

As per the deal, the Maytas consortium would run the project for 35 years, which could be further extended by 25 years. It would get 269 acres of land from the government, much of it chunks in prime areas of Hyderabad. Maytas would also get to commercially exploit real estate around the Metro stations to generate revenue. Raju was looking at putting in the money now to reap huge benefits a few years down the line. 

(Image: Facebook/HMRL)

There were two reasons why Raju decided to board the Hyderabad metro rail. One, he owned through a maze of unlisted companies, sizeable chunks of land on the outskirts. The estimate according to agencies is that his family owned 6,800 acres of land in Hyderabad and also in Chennai and Bengaluru, valued at around Rs 6,500 crore. If the Metro rail routes terminated near those areas in Hyderabad, the real estate value would shoot up, benefiting Raju significantly. In Raju's mind, the rail deal was essentially a way to improve the value of the land parcels he was sitting on and make a killing in the bargain.

Two, Raju all his life at Satyam competed with the Infosys, Wipro and TCS of the IT world, wanting to be seen in the big league of Indian industry. The metro rail was his big moment where he could appear to be giving a public interest project to the people of Hyderabad virtually for free, hoping no one would read the fine print. His PR machinery would then make him seem bigger than the other IT honchos.

Raju's political clout meant that the YS Rajasekhara Reddy regime bent backwards to make the project happen. It took it upon itself to procure sites needed by Maytas within two months of the consortium depositing Rs 260 crore of performance security fee. It also undertook to pay a penalty of Rs 24 lakh for each day's delay. Knowing how governments work and the fact that various departments of the central government too were involved, it was like giving away public money to Raju through the backdoor. 

In his bid to take complete control of the project, Raju also quietly sidelined Ital Thai and Navbharat and Maytas Metro Limited, which was floated to execute the project and had most of its shares held by Maytas Infra, which essentially meant Raju and family. A PIL was filed in the Andhra Pradesh High Court over Ital Thai not playing the lead role in the project. 

It took India's Metro Man, E Sreedharan to bell the cat. He created a flutter when he wrote to Montek Singh Ahluwalia, then the Deputy Chairman of the Planning Commission, saying, “Making available 269 acres of prime land free of cost to the BOT operator for commercial exploitation is like selling the family silver...A big political scandal will ensue out of this... It is apparent that the BOT operator has a hidden agenda which appears to be to extend the Metro network to a large tract of his private landholdings so as to reap a windfall profit of four to five times the land price.”

When Sreedharan called Hyderabad Metro Rail ‘a real estate project’, all hell broke loose. The government threatened to sue Sreedharan, defending its position saying that vested interests were at work. But subsequent events vindicated Sreedharan's position. 

(A metro train during a recent trial run in Hyderabad. Image: HMRL)

A month after the contract was signed, the recession of 2008 hit the world. That meant Raju was playing with fire. He tried to raise money from the market but the liquidity in the system just wasn't there. It was then that Raju decided to merge Maytas with Satyam, pitching it as a diversification plan for the software major that had been affected by the IT slowdown.

The real plan was to plug the missing cash in Satyam's balance sheet (no one yet knew that Satyam books were all along fudged) with the land assets of Maytas. Much to everyone's surprise, the Satyam Board approved it in December 2008, without asking too many tough questions.

But the shareholders, analysts and investors, most of them from the US protested vehemently, driving the Satyam stock down. At that time, without knowing that Satyam's books were cooked up for the past 8 years, they thought Raju was using the Satyam name to fund what was seen now as a family project. 

Ramalinga Raju's plans went into a tailspin. He had hired DSP Merill Lynch to look at other options once the Maytas-Satyam merger plan flopped. That was a mistake from Raju's point of view because DSP Merill Lynch discovered the fraud that was being perpetrated by the Satyam promoters within a few days and communicated the same to Raju.

Knowing their impending letter to the bourses and the agencies was like a gun held to his head, the Satyam chief decided to come clean in the January 2009 letter to SEBI though he subsequently retracted his confession. 

Maytas could never raise the money to pay Rs 260 crore despite the extensions given. The contract was finally scrapped in July 2009 because by then, Raju had become a touch-me-not brand name. L&T won the revised bid. 

When Maytas won the bid, the Raju firm had put up billboards on the traffic medians announcing itself as the toast of the town. As the Metro rail gets set to be commercially launched, Maytas is part of Hyderabad's unsavoury history, few would care to remember.  


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