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Software fraud stops India in its tracks

MAYTAS, the construction group embroiled in India's biggest fraud inquiry, may struggle to survive as the investigation stalls funds needed to build roads and houses and investors dump the stock.

Maytas Infra Ltd has fallen by its daily limit since major shareholder and Satyam Computer Services Ltd founder Ramalinga Raju said that he tried to merge his companies to cover up a US$1-billion accounting fraud.

The takeover was vital to ease a credit squeeze at the Maytas companies as banks curbed lending to real estate and infrastructure, Raju's son, B. Rama Raju Jr, said.

Maytas Infra's chief executive has quit, part of the Raju family's stake has been taken over by banks, and the 23-year-old company can't report earnings because it's tied up with the fraud investigation. The inquiry imperils road, power and port projects and may bring down Raju's group before he comes to trial.

"It's pretty obvious that they are in deep trouble," said Apurva Shah, the head of research at Prabhudas Lilladher Pvt. "Existing creditors have no choice but few if any new creditors will consider doing business with Maytas."

Rama denied reports in the Economic Times and other local newspapers that his father siphoned off funds from Satyam for his real estate group. Prosecutors allege that executives at Satyam, India's fourth-largest software exporter, padded employee numbers, forged bank documents and diverted funds for real estate deals.

"We never got a single penny from Satyam," Raju Jr said. "Whatever assets that are in Maytas was acquired by Maytas with its own money."

Raju, when admitting to inflating assets and profits at Satyam, called this aborted bid a "last attempt to fill the fictitious assets with real ones."


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