The clout of Ramalinga Raju

In 1992,Satyam Computer Services went in for a public issue. The objective was to set up a software technology park...

Written by Sreenivas Janyala | Published:January 18, 2009 10:50 pm

In 1992,Satyam Computer Services went in for a public issue. The objective was to set up a software technology park and a 100 per cent export-oriented unit for software development in Hyderabad. So when N. Chandrababu Naidu of the Telugu Desam Party became Chief Minister in 1995 and was bubbling with ideas and dreams of making Hyderabad an Information Technology hub,he found the perfect launch vehicle in Satyam. Thus began an association between an IT-savvy Chief Minister and B. Ramalinga Raju,Satyam’s founder and chairman.

Raju and Naidu

For Naidu and Raju,it was mutual—Naidu needed Satyam to promote Hyderabad as the next IT destination while Raju needed the CM’s zeal to fuel his own ambition of emulating the success of IT majors like Infosys. It only helped that Naidu went on to become the co-chairman of the National Task Force,set up by the Government of India to prepare a road map for IT. As Naidu shaped Hyderabad’s Hitec City,Satyam kept growing. Former executive directors of Satyam,who quit to start their own ventures,say Satyam’s growth was phenomenal between 1995 and 2004 when Naidu was chief minister for two consecutive terms.

“Raju’s association with Naidu gave him such clout that he got prime real estate at throwaway prices. The Naidu government allotted large chunks of land to set up software technology parks and huge facilities,which enabled Satyam to expand and grow quickly. In spite of Satyam’s own competence,its phenomenal growth would not have been possible without Naidu’s support,” says political analyst I.M. Venkat Rao.

“It is not without reason that Raju’s Satyam success and Naidu’s IT accomplishments are mentioned in the same breath even today,” says a former Satyam executive director who quit in 2001 to start his own venture capital firm.

In 1997,Satyam established a school at the Indian Institute of Information Technology in Hyderabad,joining a select band of global corporations like IBM,Microsoft and Oracle who have set up similar schools.

In 2000,during US President Bill Clinton’s visit to India,Naidu—after much lobbying and with his skillful presentations of Cyberabad and Hitec City—convinced Clinton to add Hyderabad to his itinerary. So when Clinton visited Hyderabad on March 24,2000,Raju,with his clout and close rapport with Naidu,won a place on the list of VIPs who were introduced to Clinton. Naidu also invited Raju to make a speech at a function organised by the Confederation of Indian Industry on ‘India and US: Leaders in Science and Technology’. After his speech,it was Raju—not the CM—who invited President Clinton to address the gathering of India’s top industrialists and IT honchos.

Satyam’s stocks not only soared after Raju’s brush with the US President,it also opened many doors for the IT firm in the US and added scores of Fortune 500 companies to Satyam’s list of clients. “It was clear then how close Naidu and Raju were and what they were willing to do for each other. The Tatas and Premjis were ignored while Raju shared the dais with the US President. Naidu badly wanted a famous corporate name to be associated with Andhra Pradesh and he found it in Raju,” says Venkat Rao.

THE POWER

Till January 7,2009,Raju’s name was enough to swing open any door—be it the government,banks,financial institutions,political parties and even other corporates. Sources in the Economic Offences Wing of the CID,which is investigating the Satyam fraud,say it appears that banks and financial institutions never questioned Raju about opening thousands of accounts or providing statements about the company’s finances.

Raju wielded enormous clout among smaller IT companies from where Satyam would regularly ‘borrow’ highly-qualified and experienced engineers and resource personnel in case Satyam fell short while working on big projects. “Nobody in the IT sector,except for the top three or four companies,would say no to Raju,” says a former technical director of Satyam. Raju’s firm also allegedly had backdoor access to many rival firms and would invariably end up knowing the price they had quoted for a prestigious project even before the bids were opened. Satyam would then quote less than them and bag the project.

“Raju had inside information on government policies,development plans and big projects even before the blueprints would be prepared. The family would buy large tracts of land around areas where important state government projects were coming up. The international airport,IT areas in Madhapur and Ranga Reddy district are instances when Raju had information beforehand and bought land there,” an official says.

Long before the present Congress government decided to go ahead with the Metro Rail Project,the Satyam family firm Maytas Infra went into overdrive to find partners to form a consortium to bid for the prestigious project. “That is how the Maytas-led consortium pipped all other competitors for the Metro Rail project. In fact,it was known that Maytas would bag the project,” says an official of Hyderabad Metro Rail.

Raju and YSR

Sources close to the Raju family say that after the Congress came to power in 2004 and Y.S. Rajasekhara Reddy became Chief Minister,Raju’s transfer of loyalties was smooth. “Though YSR sulked for some days because of Raju’s close association with Naidu,it didn’t take him long to be placated. If Satyam benefited from Naidu,now it was the turn of the family-owned Maytas to benefit from the Congress government and Reddy. The company has grown in the last four years from being a small real-estate dealer to executing projects worth Rs 30,000 crore. It was possible only because the state government favoured it while awarding contracts to build irrigation projects,ports and finally the Rs 12,000 crore Hyderabad Metro Rail,” says Rao.

Insiders say Raju lost interest in Satyam almost eight years ago. In fact,sensing that something was not right,many senior management people who helped shape Satyam sold their shares and quit. Among them was C. Srini Raju,Ramalinga Raju’s brother-in-law,who was chief technical officer and later executive director at Satyam. He exited with 80 lakh shares,which he eventually sold off. Srini Raju refused to reveal what was amiss but said he never discussed business with Raju again after that.

While Raju was not so visible with YSR—as he was with Naidu—he gradually started building Maytas. The company started growing from 2004 just like Satyam did in the first few years of Naidu’s government. The real estate boom,allegedly fuelled by the Congress government,benefited Raju and Maytas. They bought land all over Hyderabad and neighbouring districts. Prime real estate was allotted to Maytas to be developed as Special Economic Zones. Meanwhile,Raju liquidated his shares in Satyam and bought more land wherever possible. With land prices soaring,Raju and Maytas became richer and more powerful. “Raju’s clout ensured that a number of high-profile projects were awarded to Maytas—irrigation projects worth Rs 8,000 crore,the Machilipatnam port project worth over Rs 1,600 crore and the Hyderabad Metro,” says an official involved with the Satyam investigation.

The Congress government even chose the Byrraju Foundation set up by

B. Satyanarayana Raju,father of Ramalinga Raju,to start the 108 emergency services under the Emergency Management and Research Institute (EMRI) started by Satyam. People who worked with Raju say it was probably his interest in promoting Maytas as a family company that cost him Satyam.

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