Satyam sibling, Maytas, looks in trouble now

More than Satyam, it's the uncertain future of Maytas Infra Ltd that could precipitate a bigger crisis for Andhra Pradesh, where the company has bagged scores of development projects in recent years.

Chief Minister YSR Rajasekhar Reddy, who has ordered a review of all projects involving Maytas, told Hindustan Times on Sunday his government “might have to look at (changes in) the management” – much like what the central government did with Satyam.

His comments came amid growing criticism that the proximity of disgraced chairman of Satyam, B. Ramalinga Raju, to the political class helped Maytas leapfrog from a little-known construction company into an infrastructure conglomerate.

From building irrigation facilities and residential townships to constructing ports, Maytas has been on a winning streak for the past couple of years.

The 20-year-old company's annual turnover rose eight times in just three years — from Rs 220 crore in 2005-06 to Rs 1,670 crore in 2007-08.

Last year, it won more than Rs 18,000 crore in contracts, including the Rs 12,000-crore Hyderabad Metro Rail project and a port project in Machilipatnam (Rs 1,600 crore).

Raju's eldest son, Teja Raju, runs Maytas, which is Satyam spelled backward.

"It has been among the favoured companies of the political leadership here," said EAS Sarma, a former secretary in the Union finance ministry. "In many cases, there wasn't much of competitive bidding. It was done almost on a nomination basis."

The order book of Maytas is not limited to Andhra Pradesh. Last year, it won electrification projects for four districts in Maharashtra, development of two airports in Karnataka and a slew of orders from UK-based Vedanta Resources for its giant alumina and power projects in Orissa.

In Karnataka, where it's also involved in a couple of road projects, the chief minister discussed the Satyam fallout at a meeting with senior ministers on Friday. “We will watch if these projects are going to be delayed or cannot keep to the schedule,” Home Minister V S Acharya told HT.

Officials in Maharashtra said they would review the contracts with Maytas only if monthly work audit show lack of progress.

Spotlight fell on Maytas, after Raju proposed on Dec 16 that it be acquired by Satyam. The proposal — which, Raju later admitted, was aimed at covering up the Rs 7,000-crore fraud at Satyam — was scuttled by financial institutions holding substantive stake in the company.

As the Satyam saga unfolded, it brought trouble for Maytas as well. Its shares have tanked more than 40 per cent and, last week, the company was forced to pledge its shares with a financial institution for a loan Rs 125 crore.

“The company is working toward financial closure for these projects," said a Maytas spokesman, adding, “As per the company law and SEBI norms, neither fraud nor fudging of accounts has been reported, therefore change of management does not rise.” He refused to be identified.

The buzz in Hyderabad is that Maytas, if it fails, could extract a bigger toll on the state than Satyam. It could also snowball into a major political issue, given that general elections are due in months.

"It will be a disaster," said MV Mysura Reddy, a Telugu Desam MP. "All those big projects they are involved in will be grounded. It will be bad for the economy, for common people."

Sarma said he has already written to the government, asking them to cancel the contracts for Hyderabad Metro and the port project in Machilipatnam, if Maytas fails to tie up funds in time.

In the aftermath of Satyam, “banks will hesitate to lend,” he said.

Financical closures for these two projects are due in March and April respectively.

Chief Minister Reddy agreed there were concerns about funds that can be raised by Maytas, but he declined to comment on action that would follow if deadlines for financial closure were missed.

“We will have to find ways and means to get these projects going,” he said.

With inputs from Ashok Das in Hyderabad, B. Srikanth in Bangalore and Dharmendra Jore in Mumbai.