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Ernst & Young auditors starts Maytas evaluation

Ernst & Young auditors starts Maytas evaluation

E&Y says the process was "much longer" than just one day.

New Delhi: Global auditing major Ernst & Young (E&Y) on Wednesday said it had started work on evaluating Maytas Properties even before signing a formal engagement letter and the process was "much longer" than just one day.

Besides, E&Y said, it followed the standard industry practice for property companies to be valued on the basis of their land bank and development rights and it did not overvalue Maytas Properties.

On Tuesday, the Government counsel to the Company Law Board had alleged that E&Y valued Maytas Properties at Rs 6,523 crore against its turnover of mere Rs 22 crore.

"As per our knowledge, the company does not have any land bank and this company, having a turnover of mere Rs 22 crore, was valued at Rs 6,523 crore," the counsel said, adding that the valuation was done in a day.

Reacting to the charges, E&Y said in statement, "Our association with the engagement was much longer, which can be demonstrated by sufficient documentation on the matter."

"It appears likely that the allegation is based on the time elapsed between the signing of the contractual engagement letter with our client and the final date of submission of the report. As is normal in such cases, work on the engagement had been initiated prior to the formal signature on the engagement letter," E&Y said.

"With respect to the valuation of MPL, it is standard industry practice for property companies to be valued on the basis of their landbank and development rights," E&Y said.

It further added that E&Y was not appointed by Satyam or any of its subsidiaries to conduct the valuation of Maytas Properties and was engaged to undertake a valuation, as required under the RBI guidelines, "for a proposed share transaction involving existing shareholders of Maytas Properties Limited".

"We were not given to understand by any party, explicitly or implicitly, during the valuation exercise, about Satyam's plans to acquire Maytas Properties. We would also like to state that Satyam Computer Services Limited was not a shareholder in Maytas Properties," the statement added.

Maytas Properties is an unlisted company promoted by family of B Ramalinga Raju, the founder and former chairman of Satyam Computers. In December last year, Satyam proposed to acquire Maytas Properties and a Raju family-promoted listed firm Maytas Infra for $1.6 billion, but had to call off the deal after severe criticism by investors.

Later in January, Raju disclosed a Rs 7,800 crore financial fraud at Satyam and said that the aborted acquisition of Maytas firms failed his efforts to fill fictious assets with real ones at Satyam. Since then, the Government has ordered probes into Satyam as well as the two Maytas firms, along with more than 300 other companies related to the Raju family.

first published:February 25, 2009, 23:21 IST