Satyam Chairman and MD Resigns

DKG · 7th January 2009, 17:28

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.

hondadude · 7th January 2009, 17:31

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 ?

bblost · 7th January 2009, 17:31

Do you guys really think there are 53k employees?

Steeroid · 7th January 2009, 17:33

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.

deetee · 7th January 2009, 17:34

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.

Steeroid · 7th January 2009, 17:36

Quote:

Originally Posted by deetee

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.

deetee · 7th January 2009, 17:41

Quote:

Originally Posted by Steeroid

If that is the case expect a further collapse for Sensex.

I sincerely hope that doesn’t happen. These days we have enough problems to cope with,just glad that Indian economy withstood the crisis in the west.And let the sensex not spoil it.

kutlee · 7th January 2009, 17:45

FT.com / India / Companies - Timeline: The Satyam scandal

There is timeline of events in this link (subscribed link).
The london based council which awarded the golden cock (BBC's TOp gear has some similar award i guess) is reviewing the award case now. IT seems that world bank had imposed sanctions in dec 08 itself.

Mission_Safari · 7th January 2009, 17:48

Quote:

Originally Posted by bblost

What exactly is this fraud?

I am not quite able to understand it.

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.

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.

Samurai · 7th January 2009, 17:56

Quote:

Originally Posted by Steeroid

ARTHUR ANDERSON.

I know, I know. I was typing too fast and clicked reply because I had to jump into a meeting. Didn't even see what I typed.

ballkey · 7th January 2009, 17:57

@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.

aaggoswami · 7th January 2009, 18:03

Today dad came from office and since then he is on CNBC and now I am reading this. This will be giving a very bad effect on economy and already the times are not good, rather the times are very bad and we are hearing this news. But I think more than two people who are at fault. How were these things even signed off ?

ballkey · 7th January 2009, 18:05

And I g uess it was ARTHUR ANDERSEN, while we are correcting typos

deetee · 7th January 2009, 18:09

Quote:

Originally Posted by Mission_Safari

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

Mission_Safari · 7th January 2009, 18:13

Thanks Ballkey and Deetee. So my understanding on this problem is not completely wrong.

7th January 2009, 17:28	#76
DKG Senior - BHPian Join Date: Feb 2008 Location: Hyderabad Posts: 3,711 Thanked: 1,389 Times View My Garage	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.
	() Thanks

7th January 2009, 17:31	#77
hondadude Senior - BHPian Join Date: Jul 2006 Location: Bangalore Posts: 1,044 Thanked: 69 Times	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 ?
	() Thanks

7th January 2009, 17:31	#78
bblost Team-BHP Support Join Date: Jul 2007 Location: Hyderabad Posts: 11,008 Thanked: 15,355 Times View My Garage	Do you guys really think there are 53k employees?
	() Thanks

7th January 2009, 17:33	#79
Steeroid Senior - BHPian Join Date: Mar 2005 Location: N.A Posts: 7,046 Thanked: 2,751 Times	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.
	() Thanks

7th January 2009, 17:34	#80
deetee BHPian Join Date: Oct 2007 Location: Hyderabad Posts: 485 Thanked: 1,593 Times View My Garage	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.
	() Thanks

7th January 2009, 17:45	#83
kutlee Senior - BHPian Join Date: Jul 2005 Location: Hyderabad Posts: 1,141 Thanked: 232 Times View My Garage	FT.com / India / Companies - Timeline: The Satyam scandal There is timeline of events in this link (subscribed link). The london based council which awarded the golden cock (BBC's TOp gear has some similar award i guess) is reviewing the award case now. IT seems that world bank had imposed sanctions in dec 08 itself.
	() Thanks

7th January 2009, 17:57	#86
ballkey BHPian Join Date: Sep 2005 Location: Chennai Posts: 425 Thanked: 35 Times	@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.
	() Thanks

7th January 2009, 18:03	#87
aaggoswami Senior - BHPian Join Date: May 2007 Location: Vadodara Posts: 4,982 Thanked: 2,931 Times	Today dad came from office and since then he is on CNBC and now I am reading this. This will be giving a very bad effect on economy and already the times are not good, rather the times are very bad and we are hearing this news. But I think more than two people who are at fault. How were these things even signed off ?
	() Thanks

7th January 2009, 18:05	#88
ballkey BHPian Join Date: Sep 2005 Location: Chennai Posts: 425 Thanked: 35 Times	And I g uess it was ARTHUR ANDERSEN, while we are correcting typos
	() Thanks

7th January 2009, 18:13	#90
Mission_Safari BHPian Join Date: Jan 2008 Location: Chennai Posts: 449 Thanked: 6 Times	Thanks Ballkey and Deetee. So my understanding on this problem is not completely wrong.
	() Thanks