Team-BHP - Satyam Chairman and MD Resigns

Do you guys think we will see a class action suit to recover losses investors will now face? Both Satyam and the audit company could be held liable, as audited results announced directly impact share prices and now with the fact of cooked books being acknowledged this amounts to investors being cheated. Under the Indian Penal Act this is a criminal offence.

This is really a sad day. While a lot of folks are worried about what happens to Satyam's business and its workforce (and rightly so), I think the timing of this couldn't have been worse for Indian IT industry. There is a very strong anti-off-shoring anti-outsourcing sentiment in US and this might be tipping point. It will definitely impact the business other service companies (WIPRO/Infy/TCS) and IT outsourcing to India in general.

The question now is, what can other companies do to minimize the impact ?

I guess all this makes Satyam an even cheaper buy for anyone who is looking for an acquisition - regardless of how well the books were cooked, the fact remains that this was not a manufacturing company which ceases production of its product.

They are in the knowledge business, their strength is their knowledge and manpower - anyone acquiring the business can quickly put a new brand over everything and continue what must (hopefully) have been a lucrative business.

The company is indeed audited by PWC.

Link to NYtimes ariticle :
"
The company is audited by PricewaterhouseCoopers, which had no immediate comment.
"
Actually NYtimes is exaggarating the situation.
"...The scandal immediately raised questions over accounting standards in India as a whole, as observers asked themselves whether similar problems existed elsewhere. The risk premium for Indian companies will rise in investors’ eyes, said Nilesh Jasani, ..."

May be this is what we can expect from outside media in coming days.

A mistake has happened,thats true. Now besides getting to the bottom of it, lets try to see that shock waves will not topple any more big ships. Governement should scrutinise other listed but family run companies just to make sure that we don't read similar news in future.

Quote:

Originally Posted by deetee (Post 1120441)

Actually NYtimes is exaggarating the situation.
"...The scandal immediately raised questions over accounting standards in India as a whole, as observers asked themselves whether similar problems existed elsewhere. The risk premium for Indian companies will rise in investors’ eyes, said Nilesh Jasani, ..."

Meaning foreign funds may pull out more funds from the Indian markets, if that is the case expect a further collapse for Sensex.

Quote:

Originally Posted by bblost (Post 1120230)

What exactly is this fraud?

I am not quite able to understand it.stupid:

Satyam showed more profits than what they were making. This means they would have had to pay more taxes to the govt as well. That is a good thing.

People kept buying shares because they thought this company was making more money than it actually was. That is a bad thing.

Can some one please explain this to me?

I am not very clear on this too. stupid: Please can someone explain.

How i interpret this is that by showing inflated revenue figures the share price was manipulated which inturn benefitted Mr.Raju and family.

@Mission_Safari: This is fraud on so many levels, to the employees, shareholders, clients everybody

- The company has declared non-existent revenue, and the balance sheet isnt worth the paper its printed on. Every investor makes(or is supposed to make) investments based on studying the company's current and past performance.
- The company's ability to pay their employees is totally compromised - if the cash balance drops from 5300 crores to 300 crores, how will they pay salaries?
- Finally, the trust estabilished with customers/partners are severely compromised; who will trust a service provider who fudges their books?

All-in-all, I hope Satyam pulls through. I've relatives employed there; and a lot of my friends are Satyam folks. Hope they keep the company afloat and come back strongly.

Quote:

Originally Posted by Mission_Safari (Post 1120463)

Please can someone explain.

How i interpret this is that by showing inflated revenue figures the share price was manipulated which inturn benefitted Mr.Raju and family.

1.Lets leave aside the debate over whether Mr.Raju had personally misused any of the company funds. If that was the case, then its entirely another set of charges.

2.What Mr. Raju has said is that , he(along with someone else) consciously inflated the actually operational margins and cash balances so as to project a very healthy (or wealthy) state of the company in the market eyes
3.That way, as long as the share price stays high enough , company would be safe from forceful takeovers (-by buying huge shares in open market)
4. Well Mr. Raju has been successful with that as he has evaded some rumored takeovers for quite some time.

5.But on other hand , many small and big investors have bought or traded satyam shares at much higher ‘inflated’ rate than the ‘lower’ actual rate.

6. So, that means if a person has bought 1000 shares each for rs.500 in open market , assuming actual value (had the books been right) is rs.200, the person has been cheated by about rs.300,000 by Mr. Raju’s action of inflating assets

7. Moreover,in the recent few months ,when drama on satyam stage is drawing towards climax, many shares might have been traded in huge volumes with some insider information about impending collapse. So, depending upon who actually has been benefited by this nick of the moment selling, it could be another fraud.
It’s like you know the ship is sinking because you unplugged a hole and you use limited life boats to save yourself ,while a good number of helpless people are still in the ship unaware of actual situation