Satyam has been outscoring opponents in the market in last few years, two years back most of the investment companies and institutional investors were putting all hopes on Satyam. Even If stable companies like TCS and Wipro were struggling for high numbers, Satyam was showing greater profits, maybe thats exactly what happened now.
It was one of the darkest days in history of corporate India. Early this morning, B Ramalinga Raju — the founder of Satyam Computers, one of India’s largest IT companies — dropped a bombshell when he sent a five-page letter to the stock exchanges confessing to one of the biggest frauds ever seen.
Satyam had nothing by way of a balance sheet and it had been cooking its books for the last many quarters, fabricating lies for the benefit of all its shareholders, for its independent directors and other directors and perpetrating a lie that went through for several years before he chose to confess this morning.
The result: the Satyam stock lost 75% of its market cap, a huge collateral damage took place across the market that tanked 750 points raising a lot of apprehensions about how the world would see it both for the IT services sector, the Indian corporate sector and its standards of governance and also to how FIIs would react to such an episode.
Shankar Sharma of First Global sees the stock going to zero levels, “probably by the next trading session because there is still 100% to be lost even from these prices.” He added, “I firmly believe that no company in its right senses will want to go and take a look at its books, or try and look at it as an acquisition candidate because it is a loss-making company.”
Ganesh Natarajan, Chairman, NASSCOM, feels it will take about six months to get the company’s financials back on track. “Satyam is still a good company if you trim the company a little, salvage the customers’ expectations and the customers’ projects.”
Bhavin Shah, MD, Head-Technology Equity Research, JP Morgan, sees payment issues going ahead for the company as it doesn’t seem to have any cash balance.
Ramesh Damani, Member, BSE, believes that this quarter markets will not be able to cross the high of 10,500 that the Sensex made early morning today. “I agree with Shankar Sharma that someone could bottom fish and make a few bucks on Satyam but it is pointless. But I disagree with him on the stock going to zero because for some reason in India, stocks don’t go to zero even when the companies go bankrupt, even when they languish for years.”
Ved Jain, President, ICAI, said they are examining all possibilities and put the machinery in the motion to find out what really happened whether the auditors were negligent or were hand-in-hand. He is sure of the fact that serious action is under contemplation and will be taken.
Vallabh Bhanshali, Chairman, Enam Securities, feels that this is an accident and to convert this into a practice in the country would be a big stretch. According to him, it will trigger a lot of action. However, he doesn’t see confidence in the IT sector eroding in the country as a whole.
Harish Salve, Eminent Lawyer and Counsel, said the issue of prime importance now was the security of the 50,000 employees. “I have not had any dialogue with Raju. They had wanted to consult me in the earlier issues, which related to that acquisition, after which I’ve had no interaction with them. Today, I just made some inquires to some people and I have been told of the appalling events of the day.” He added, “There are 50,000 employees and their lives are on stake. According to me, in today’s time and in India, that’s of critical importance because this is a service-driven industry. This is going to be a major setback to the IT sector in India.”
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