Misfortunes always comes in twos—that is what perh
aps has been happening to B.Raju and his company satyam.
The chairman of Satyam Computer
Services B.Ramalinga Raju-India's 4th-biggest software services exporter, announced his resignation on Wednesday, triggering a more than 60 percent drop in the company's share price.
In a statement to the stock exchange,
B. Ramalinga Raju said Satyam's end-September balance sheet had been overstated. He apologised to staff and shareholders and said he was prepared to face the legal consequences.
The resi
gnation came in just within 24 hours after Forrester backtracked on Satyam and 24 hours prior to the scheduled Board meeting on 10 January.
The benchmark indices have extended losses further due to sharp cut in Satyam. Satyam's board in a press release mentioned that the balance sheet has in
flated cash & bank balance of Rs 5040 crore. The balance sheet has inflated accrued interest of Rs 376 crore in books is non-existent. The stock crashed nearly 50%.
According to press release, Rs 1,230 crore was arranged to Satyam,
which is not reflected in books. Raju said Merrill Lynch can be entrusted to explore merger options. Ram Mynampati to act as interim CEO.
In a letter to the board members, Raju also said that the company reported inflated revenues over years.
In reaction
to Raju’s revelations, the stock was hammered by investors and it is down over 48 per cent.
He said that he feared takeover due to poor finance performance. Coming clean on financial irregularities,
he said that the company had Rs 1,230 crore worth of understated liability as of September 30.
He also revealed that he tried to fill fictitious assets with Maytas deal.
His decision was conveyed to the company’s board members. The company was supposed to hold a board meeting this Saturday.
The company has submitted a copy of a communication sent by Ramalinga Raju, addressed to the Board, with the stock exchanges, capital market regulator SEBI and senior leaders of the company.
Satyam said that it is also in receipt of resignation tendered by Rama Raju, Managing Director of the company who will continue in the position only till such time the current Board is expanded and the continuance is just to ensure enhancement of the Board over the next several days or as early as possible.
Shares of Satyam have tumbled by over 60% to Rs.70. The scrip plunged to an intra-day low of Rs45 after hitting an intra-day high of Rs.188. The stock recorded volumes of over 100million shares within a span of 45 minutes Wednesday morning, on BSE.
Satyam has informed that DSP Merrill Lynch has terminated its engagement with the company. Merrill Lynch was entrusted with the task of finding a strategic option for the company in the wake of the controversial withdrawal of the plan to acquire two promoter group companies.
Reactions are coming in fast from the various quarters of the Indian IT fraternity, most of which are drenched with the feeling of shock.
CB Bhave, the chairman of Securities and exchange board of India said that, Satyam’s CEO’s open letter to all the affected parties itself does not clarify all the misdoings and the veracity of the letter can’t be vouched for. also the auditors, the independent directors, the banks cannot be washed away with, they also have a lot to answer.
R.K. GUPTA, MANAGING DIRECTOR, TAURUS ASSET MANAGEMENT, NEW DELHI:
"If a company's chairman himself says they built fictitious assets, who do you believe here? Not only Satyam, this has put a question mark on the entire corporate governance system in India. Probably he will face a rigid enquiry. Anyway, things are pretty bad."
V.K. SHARMA, HEAD OF RESEARCH, ANAGRAM STOCK BROKING:
"It reduces confidence (in corporate governance). It's absolutely wretched.
"There is no option right now (for Satyam). People will leave, clients will walk away. It's a very, very dire thing that has happened. There will be question marks raised everywhere."
JIGAR SHAH, SENIOR VICE-PRESIDENT OF KIM ENG SECURITIES:
"I think there is no future for this stock. This case for India is similar to what happened to Enron in the U.S.
Perhaps this the biggest worry. Chairman of NASSCOM Ganesh Natarajan said in his statement on CNBC TV 18, minutes after the ‘Satyam shocker’, that it wont be easy to say that this entire episode would not affect India’s offshoring reputation, keeping in mind that the corporate governance has not always been on the priority of the offshore clients; fortunately or unfortunately. Well, any takers for that?
It’s an interesting twist indeed, as Forrestor was severely critical in its latest report after the Satyam Maytas controversy came out in the open.
But the way Satyam was apparently twisting another report to indicate how Forrestor always said good things about Satyam, is now clearly an embarrassment for both the sides.
The research firm, in its latest report suggests apart from the upheaval on the employee front that unrest amongst the clients is growing and can impact Satyam's business in a big way.
It will not stop at Satyam. Many more companies will come into scrutiny like that. There is a strong possibility investments in India will be affected.
News Courtesy: Economic times
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