Ramalinga Raju

SATYAM : Seems Sunk and looks difficult to Save and Salvage as too many Contingencies scaring off potential Buyers

4 Comments / Controversies, Corporate Governance, Information Technology, Insider Trading, Interesting News Sightings, Investing Themes, INVESTOR MISTAKES, Reflections, Satyam : The Sordid Asatyam Saga, STOCKS, VALUATION / By Gaurav Parikh

On Paper, as of September 30,2008 the Assets of Satyam were Rs 8300 crs…after adjusting for the overstated assets and understated liabilities as confessed by the now disgraced Promoter Chairman,Ramalinga Raju the networth of Satyam drops to @ Rs 1200 crs….With 67 crore shares of Face Value Rs 2 in existence,the book valueper share would get restated to around Rs 20…Satyam’s Share Price has dropped from yesterday’s closing of Rs 40 to Rs 20 this morning reflecting this

But will Satyam’s Share Price drop to Zero or move up from here !? Will Trading be stopped in it ?

The Andhra Pradesh Chief Minister has written to the Prime Minister to form a Committee of I T Stalwarts,Narayan Murthy from Infosys,Azim Premji from Wipro and Ramodarai of TCS to salvage Satyam and save the jobs of over the claimed 50000 Satyam Employees

However,as I look at it right Now even this restated networth of Rs 1200 crs of Satyam looks suspect and will be under threat on two accounts

Ramalinga Raju has confessed that for years he inflated Revenues and Profits in Satyam ..It has to be investigated as to when did he start doing so and what is the quantum of inflated revenues and profits…If he inflated Revenues,then it would mean perhaps that the Debtors have been overstated and further adjustment may not be required here…but Profits may convert to losses and therefore Reserves may need further adjustment to reflect the quantum of overstated profits…This would reduce the Networth further and posssibly make it Negative…This would mean the Book Value of Rs20 too would appear overstated
Law Suits have already been filed in USA on behalf of ADR Shareholders and law suits will surely follow in India too….Claims in such suits runs into Hundreds of Millions of Dollars…Satyam may not be solvent enough to tackle such Claims…Right Now such Claims are Contingent

There are some other tainted issues too…like the Real Number of Satyam Employees…Management claims 53000 employees….It is suspected that this figure is grossly overstated…Also there is strong views on the Credibility of Satyam Managers…Most IT Companies are smply in no hurry to absorb them…In fact Infosys has categorically said it will not touch tainted Satyam and has also instructed it’s HR Dept not to entertain Satyam Employee Resumes

It is difficult for any Potential Buyer to only absorb the Operating Business of Satyam without exposing themselves to the sword of growing Contingent Liabilities

As a seperate Legal Entity,Satyam is toxic to touch right now…However what will happen is that It’s Lifeline,it’s Clients will review their relationship with Satyam and in all probability migrate to other IT Companies as the risk of staying with Satyam may be too high…Satyam resources may be directed towards fighting for survival rather than Client Servicing…To maintain some level of Continuity,what is possible is that Satyam Teams working on Genuine Client Business may also migrate to the Clients directly or to the IT Company that has taken over from Satyam to serve the Client

The Nightmare for Satyam has only just begun…..difficult to see any potential Buyer taking the risk to buyout Satyam,given the growing contingent liabilities…therefore cannot advice to buy into Satyam at Rs 20

Remember the risk that some crazy NSE Member took when he bought Millions of Shares of the tainted Global Trust Bank at Rs 9 to Rs 11 a few years ago in the wrong belief that a white knight or the Government will bail it out read more

Satyam Auditors, Price Waterhouse, issues a statement late today..Let’s put it in perspective

6 Comments / Controversies, Corporate Governance, Information Technology, Interesting News Sightings, INVESTOR MISTAKES, Reflections, Satyam : The Sordid Asatyam Saga, STOCKS, VALUATION / By Gaurav Parikh

In this unfolding Satyam Saga unleashed by Chairman,Ramalinga Raju’s confession on fudging accounts for years,this evening we had their auditors,Price Waterhouse releasing a statement defending their audit of Satyam ,stating it complied with generally accepted auditing standards in India and that there was appropriate evidence to support their audit

They have also ,under the excuse of client confidentiality,refused to give more details

Come on Price Waterhouse !…what Client !? Satyam !?…legally it is the Shareholders (Satyam has over 2 lakh of them) who have reappointed you at the last AGM as the auditors…you have a fiduciary responsibility to them more than to Satyam…so hiding behind the Coat of Client Confidentiality is clearly ill- advised

It would ofcourse be interesting to see what their ‘appropriate evidence’ is.

But let’s put their role in perspective and in context of the last published Annual Report of FY 2007-8

Relevant Extracts from Satyam’s Annual Report of FY 2007-8

Pages 39 and 40

AUDIT COMMITTEE

The Audit Committee consists of 100 percent independent and non-executive directors.There were four Members….Prof M Rammohan Rao,Chairman,Dr (Mrs) Mangalam Srinivasan,Mr T R Prasad,Prof V S Raju….There were seven committee meetings in 2007-8 an were attended by the CFO,Head of Internal Audit and Statutory Auditors as Invitees.The Committee reviewed the adequacy of the Internal Control Systems and Internal Audit Reports and their compliance thereof.

Page 56

Internal Control Systems and their Adequacy…Part of Managment’s discussion and analysis…Important Points

The Internal Audit,an independent appraisal function to examine and evaluate the adequacy and effectiveness of the Internal Control System,appraises periodically about activities and audit findings to the AUDIT COMMITTEE
Internal Audit ensures that transactions are executed and assets are safegaurded
The AUDIT COMMITTEE was constituted as a sub -committee of the Board of Directors and it consists solely of Independent Directors.The committee also holds discussions with statutory auditors,internal auditors and the Management.It also reviews with the statutory auditors the scope and results of the audit
Compliance with Section 404 of the Sarbanes-Oxley Act 2002
Under revised Corporate Governance standards adopted by the Stock Exchanges a Certification has to be made by the CEO and the CFO of the effectiveness of the Internal Control Systems and that they have disclosed any deficiencies and how they were resolved to the Auditors and the Audit Committee

Page 60

Personnel Costs…Part of Managment’s discussion and analysis…Important Points

Personnel Costs were Rs 5045.54 crs ( 62.01% of Revenues ) for an aggregate employee base of 55360 of which 43279 were technical associates,2690 were non-technical associates and 9391 were onsite technical associates

Page 62

Auditors Report to the Members of Satyam Computer Services Ltd

Point 2 : We conducted our audit in accordance with auditing standards generally accepted in India.Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement….We believe that our audit provides a reasonable basis for our opinion

Point 4 g goes on to give the auditors unqualified opinion that the financial statements that comprise the Balance Sheet,the Profit and Loss Account and the Cash Flow as on March 31,2008 ,read with the notes give a True and Fair view inconformity with generally accepted accounting principles in India read more

NOW TWO MORE SERIOUS QUESTIONS EMERGE IN THIS SORDID SATYAM SAGA UNFOLDING!

3 Comments / Controversies, Corporate Governance, Derivatives Strategies, Information Technology, Insider Trading, Interesting News Sightings, INVESTOR MISTAKES, Reflections, Satyam : The Sordid Asatyam Saga, STOCKS, VALUATION / By Gaurav Parikh

Now Two More Serious questions need to be answered in this continuing Satyam Saga !

QUESTION NO 1

DID RAMALINGA RAJU INTIMATE LENDERS TO SELL HIS PLEDGED SHARES BEFORE RELEASING HIS CONFESSION LETTER TO REALISE A BETTER PRICE TO CLEAR MORE OF THE LOAN ?

This is very much posssible as the Promoters Holdings was 8.61 % on December 16,2008 when Satyam announced the controversial Maytas Takeover Proposal but has since dropped to below 4%…It so transpires that promoters had pledged their shares to raise funds…Ramalinga Raju claims in his confession that the understated Liability of Rs 1230 crs in Satyam is on account of his raising funds for the Company against his own Shares !

Lenders have sold these pledged shares post December 16,2008….Question arises as to whether the disgraced Ramalinga Raju pre-warned the Lenders to selloff before he released his confession letter yesterday morning…This would have got the Lenders a better price as Satyam share was murdered yesterday from Rs 175 to close at Rs 40 on release of the Confession Letter

Another Thought !…If Raju claims he arranged Rs 1230 crs for Satyam against his shares then what was the accounting entry passed in the Books of Satyam for this ?…as Monies should have come into Satyam,the Debit obviously would have been “Bank” but where was the Credit given for the Double Entry ?…If it was ,as it should have been,given to the Lenders to reflect their Lender Status in the Books then where is the understatement ?…..Understatement arises only when the Credit was not given to the Lenders but to some other Accounting Head…It cannot have been a Single Entry…Books would not have tallied !….What the hell were the auditors Price Waterhouse doing ? How did these entries escape them in both Substance and Form ! ?

I want to know where the Credit was given in the Satyam Accounts for such funds as Raju claims were arranged by him against his shares !

OUESTION NO 2

NOW WE KNOW WHY THE MAYTAS PROPOSAL WAS STRUCTURED THE WAY IT WAS ! QUESTION IS WHICH ‘BIG FOUR FIRM ‘ CONNIVED WITH SATYAM TO BRING UP THE VALUE OF THE MAYTAS DEAL TO US $ 1.6 BILLION ! TO MATCH THE SATYAM ASSET HOLE ?

IF INDEPENDENT DIRECTORS WERE IN THE DARK,THEN WHEN THIS MAYTAS DEAL WAS PROPOSED AT THE BOARD,THEY SHOULD AND WOULD HAVE IMMEDIATELY QUESTIONED WHY ALL SATYAM CASH WAS BEING USED AND WHY THE DEAL WAS BEING ROUTED THROUGH SONS OF SATYAM PROMOTER RAMALINGA RAJU AND NOT DIRECTLY GIVEN TO MAYTAS !…AT THIS STAGE THESE GREAT ACADEMICS,PROF KRISHNA PALEPU OF HARVARD,PROF RAMMOHAN RAO,(DEAN OF ISB) AND DR MANGALAM SRINIVASAN AND INTEL ICON, MR VINOD DHAM WOULD HAVE REALISED THE DUBIOUS REASONS FOR SUCH A STRUCTURING AND THE CRIMINALITY THAT WOULD STAND EXPOSED…THEY SHOULD HAVE NOTED THEIR DISSENT IN THE MEETING ! read more

BSE,NSE and SEBI must check if Ramalinga Raju or any of his fronts shortsold Satyam at Rs 175 in Derivatives or in Morning Spot before releasing the Bombshell of his Letter that confessed to a Fraud and sunk Satyam in quicktime from Rs 175 to close at Rs 40

Leave a Comment / Chuckle !, Controversies, Corporate Governance, Derivatives Strategies, Information Technology, Insider Trading, Reflections, Satyam : The Sordid Asatyam Saga, STOCKS, VALUATION / By Gaurav Parikh

Ramalinga Raju of Satyam is nothing but a downright Cheat and a Dishonest and Fradulent promoter…however he did have the courage to confess this morning….yet he cannot be trusted

Satyam closed at just Rs 40,down Rs 138 from Rs 175

BSE,NSE and SEBI must check that Ramalinga Raju and his coterie did not benefit monetarily from this fall by shortselling Satyam earlier,knowing that the release of the Bombshell Confession Letter this Morning will murder the Share Price

How can they check this ?…just list all who shorted Satyam significantly in the past few days till this morning and made a killing…..then trace their bonafides and see if there is any link of Funds Flow or Relationships to Satyam and Maytas Promoters and their Coterie

I for one suspect that Ramalinga Raju would not have missed even this chance to benefit monetarily !

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