Acquisitions by a former group company Satyam [Get Quote] Infoway in 2000-01 and the promoters' announcement of a buyback in December last year are key issues that have caught the attention of the Securities and Exchange Board of India team that is inspecting financial irregularities in Satyam Computer Services.

Official sources said the 2000-01 acquisitions -- notably the high-profile purchase of web portal India World Communications from Rajesh Jain for Rs 499 crore (Rs 4.99 billion) -- by Satyam Infoway could mark the start of the company siphoning funds overseas under the guise of acquiring companies.

Satyam Infoway was merged with Satyam Computers in 2002.

Sources said the purchases coincided with the eight-year period for which the data has been fudged.

The inspection report by the Serious Fraud Investigation Office and Sebi will be handed over to the enforcement directorate under the finance ministry to investigate the parking of funds overseas.

Sebi will also investigate how the promoters announced a buyback when they knew there were no reserves to pay for it.

Sources said the announcement could have been a ruse to stabilise prices so that institutions could exit before former chairman Ramalinga Raju admitted financial irregularities January 7, a move that amounts to insider trading.

Also under the scanner are institutions that sold after the buyback was announced.

Bulk and block deal data from the National Stock Exchange and the Bombay Stock Exchange show that the entities concerned are Infrastructure Financing  and Leasing Service Trust Company Ltd and foreign institution investors like Swiss Finance Corporation (Mauritius) Ltd, Morgan Stanley Mauritius Ltd, Fidelity Management and Research Company, Aberdeen International  Indian Opportunities Fund, Mauritius, Aberdeen Asset Managers Ltd,  the Boston Company Asset Management LLC and JP Morgan Fleming Asset Management.

The acquisition of India World Communications -- an all-cash deal for a portal that ran popular websites such as Khel.com, Khoj.com and Samachar.com -- has raised particular interest because of its valuation. India World at the time had a capital of Rs 20 lakhs (Rs 2 million), so at Rs 499 crore for the buyout, each Rs 10 share was valued at a
staggering Rs 2,500, said a source close to investigation.

The certificate of fairness of valuation for the transaction was provided by Ernst & Young.

The deal was financed partly by the proceeds of the american depository receipts issue Satyam floated in 2000-01.

Around the same time Satyam Infoway acquired internet and e-commerce company FormsIndia.com to service its corporate clientele and interact with government agencies under its business-to-business initiative.

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