ISRO's business arm Antrix Corporation at one stage even revised the 2005 contract with Devas to grossly inflate the company's valuation, says CAG.
The change was made “to reassure (the latter's) investors”, says the CAG report tabled in Parliament on Tuesday.
Not only did it “cherry pick from two different models” to give maximum benefits to Devas, it revised clauses so that Devas raised Rs 575.76 crore from foreign investors. Devas got this “even before engaging in any trading, manufacturing, ground segment development activity and rolling out of any services.”
DoS's support helped Devas to raise substantial premium.
The result: Devas's shares were worth Rs 1,26,821 per share in 2009-10; the company's valuation rose to Rs 2,305.91 crore, increasing the share price abnormally by more than 12,682 times in the 2005-10 period.
In comparison, shares of market leader Bharti Airtel in the same field rose by only 25 times during 2003-10.
“This was indicative of the embedded value granted to Devas.”
Devas's overseas financial dealings are currently being investigated by the Enforcement Directorate. The two are also fighting an arbitration case in the Supreme Court after the deal was cancelled.
A July 2006 note by the then Antrix Executive Director, Antrix, Mr K. Sridharamurthi, benefited the company. The ED proposed to amend Article 3(i) of the contract. Mr Madhavan Nair, then ISRO and Antrix Chairman, approved it.
The clause was amended to read, “The leased capacity was to be put up for renewal at least two years before the end of 12-year period or anticipated life of the satellite for another 12 years at a reasonable lease fee to be mutually agreed upon.”
The CAG notes that many employees of Devas and its associate/promoter companies had gained significant shares after the company was formed in December 2004. The deal was signed a month later, in January 2005.
For instance, by March 2010, Devas's current Chairman, Mr Lawrence T. Babbio, held 798 shares.
His predecessor, Dr M.G. Chandrashekar, had some 35,000 shares.
MANY HATS
CAG also blames Antrix's wrong-doing on the many roles its Chairman held. Until mid-2011, the ISRO Chairman and DoS Secretary was also head of Antrix. He also was Chairman of the INSAT Coordination Committee which deals in spectrum allocation.
Antrix now has a separate CMD.