Sunday, January 11, 2009

Very much shocked as like every one, to hear about the Sathyam collapse. Really I could not even believe many things, how it has been happen!!!

Every one refers it is like a Enron scandal in US. I am not agreeing with that. The Indian economic policies, business mode, corporate culture etc., all differs from US. May be they are dealing with US and Europe clients. But commonly our folks are self conscious and believing almighty. I am saying in a common perspective the critic is always apart. I desire to share below few things.

Many had suspected that Ramalinga Raju and family were heavily leveraged at a personal level, stuck in property and thus needed a bail-out. Nobody, however, I think suspected that Satyam itself was a fraud, with no cash and a non-existent margin structure. Raju’s letter implies that the company is basically unprofitable at a net level, and made no money over the last few years. How can Satyam, with 50,000 employees and global scale, make no money at all, when even mid-tier mediocre IT companies make atleast 10 per cent operating margins? How can this fraud be going on for years? How can the auditors not have confirmed cash balances, and that too of Rs 5,000 crore? Cash is supposed to be real, profit an accounting fiction, but here the cash itself was fraudulent

I still find it difficult to believe that Satyam actually makes no money, even though the revenues, clients and employees are real. How is it that a company with a scale of 50,000 employees, which pays employees industry standard wages and has billing rates comparable to industry standards, makes no money when TCS, Infosys and Wipro make 25-30 per cent operating margins? Even mid-tier companies with only 5,000 employees make 10-15 per cent margins. If Satyam really makes no money, what accounts for the margin leakage? Where are its costs out of line? Is money being sucked out of the company? Was Raju really willing to shortchange himself and family to bail out a company in which he had no more then an 8 per cent stake (as he claims he wanted to do by merging Maytas)?

Similar way of corporate Intentional deception, I read recently that “Pramid Sai Meera” case. Even I have expressed my wonder with few of my friends that, how the people come up with new ideas to do cheating

The CA institute has to tighten standards and move against proven incompetence. The only way to win back people/ investor confidence is for justice to be done quickly and the punishment be severe enough to instill fear and disincentives corporate fraud. In the case of Enron both the company and its auditors (Arthur Anderson) went out of business. I am just providing below the Enron and PriceWaterCooper links. Have a look.
Related to this I read few news that, “Ramalinga Raju website sinks without trace. Almost” and resume updation in Naukri / Monster by Sathyam employees. Last couple of days the updation rate gone upto 15000 resumes per day and out of five one is Sathyam employee!!!.

Folks… Trust, we pray the things will straight soon and good things will happen our Sathyam friends/people.

1 comment:

pasuG said...

what i feel is, the pWc is actually money laundering the Iraqi Oil money the US army looted from Iraq - back to USA via India via Sathyam. raju was made a scape goats. and crore pati goats usually escape with only their tails cut. yes. he s already enjoying his crores stashed in jails. so what? indian baniyas are clever looters than imperial USA, UK looters. now i think the US govt is distributing this iraqi oil money in to their Banks and Big Co.s in the Garb of economic recovery efforts. Good God! I love the show thrower of Iraq - who said - "Hey Bush! its for Iraq's widows and orphans - who became so - because of America's adamant imposition of its will over other nations. this is Neo-Colonialism.