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Thursday, January 8, 2009

SATYAM:A Rs 7000 crore Lie


The irony lies in the name - Satyam, meaning truth. The real truth is that Ramalinga Raju, the politically-connected, promoter-chairman of Hyderabad-headquartered Satyam Computers, was lying for years to shareholders, employees and the world at large, building up to India's largest-ever corporate fraud of over Rs 7,000 crore.
The country's fourth largest IT company - after TCS, Infosys and Wipro and ahead of HCL - was for several years cooking its books by inflating revenues and profits, thus boosting its cash and bank balances; showing interest income where none existed; understating liability; and overstating debtors' position (money due to it).
The 54-year-old US MBA Raju's letter of guilt and resignation to the Satyam board and Sebi on Wednesday morning sledge-hammered India Inc, dumbfounded regulators, pummelled the company's stock, knocked the bottom out of the market, and cast a long shadow over industry in general and the IT sector in particular.
It also raised disconcerting questions about corporate governance, the role of auditors and independent directors.Within hours of the Satyam scandal hitting the headlines, its employees had flooded job portals across the world wide web in search of alternate employment. Consider that the Rs 7000-plus crore hole in Satyam's books is way more than the company's entire salary bill of Rs 5,040 crore last year. Worse still, it's running really low on cash, and once-potential suitors have turned wary - they don't know what lies beneath.
As for Satyam's shareholders, the stock had gone into freefall before they could even make a decent exit. By the end of the day, large-scale selling by foreign institutional investors, among others, had driven the stock down by almost 78% to just a shade below Rs 40 from Tuesday's close of a little over Rs 179, wiping out Rs 9,376 crore of investor wealth in the space of a day. Compared to its closing price of Rs 225 on December 15, the stock is down more than 82%.
For further reading please refer the following link:

http://indiatoday.digitaltoday.in/index.php?option=com_content&task=view&id=24708&issueid=87&sectionid=4&Itemid=1



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