If a stock dives 55 percent, is it time to go bargain hunting?
Absolutely not! At least that was the case with India’s Satyam Computer Services after it shocked investors on Wednesday by disclosing most of its profits were cooked up.
The disclosure came after the company’s botched attempt last month to buy two construction firms partly owned by its founders, which sent its shares diving 55 percent in one session by angry investors.
Chairman Ramalinga Raju said: “It was like riding a tiger, not knowing how to get off without being eaten.”
The shares tumbled nearly 80 percent, roiling investor confidence in India and bringing an undignified end to the illustrious career of one of the country’s top businessmen.
The accounting fraud which analysts instantly dubbed as “India’s Enron”, battered confidence in Indian companies and cast a shadow on the once-booming outsourcing industry.
The biggest Indian corporate scandal in memory threatens future foreign investment flows into Asia’s third-largest economy, already facing slowdown pangs.
The scandal rakes up a number of issues not to mention how profits could have been inflated for several years without anyone noticing. Knock Knock. Independent directors? Anyone listening?
And all this from a company which won an award for corporate governance just three months ago.
Any answers?
(Please ignore the analyst recommendation for Satyam currently running on the Reuters site. Preliminary investigations suggest there seems to be a technical glitch. We are looking into it)
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I still support satyam, He is always a good and proven persons not by wealth but by service to the society. I think it can bounce back and it will.
- Posted by RamakrishnaThe scandal with Satyam is not good, but at least he was honest and was upfront unlike most US companies who don’t even come forward until they decline. These companies have been profiting off cheap labour for years. Perhaps this will send a message to US based companies that currently do offshore employment.
Many of the companies accumulate lots of gimmicks in their bal-sheets for inflating profits. Because of government support and Lack of SEBI regulations and corruption. This should be come to an End.
- Posted by SANTHOSH BPI think the Satyam story is the tip of the iceberg.Lets’ what will unfold in the near future.It is a common malpractice harbored by corporates to inflate their profit not only in India but in many countries.In the era of cut throat competition it is a practice being resorted by companies to attract investors.
But I question the role of SEBI.A fraud of such a large scale cannot go without notice.If it has gone than what SEBI was doing because ensuring corporate governance is prime objective of SEBI.Large scale corruption will only result in such misdeeds
- Posted by PrabirI stand by Satyam. Such a great organisation cannot fall overnight like this. They will come out of this mess. One should appreciate Raju’s sincerity in taking blame entirely on him, he would have done it ( not yet proved, letter can be forged also)becuase of the pressures mounted from various communities investors, FIIs, Analysts, politics etc., Auditors cannot be blamed, if year on year, evidence is forged and confirmations given, no way Auditor can proved be grossly negiligent. Still the point remains, why did he comeout with such confession, courts would have taken their own time to prove. At this distress time, nobody is talking about good things it did to society like EMRI (108 assistance), took India global and helped several orphanages.
- Posted by ChitraSatyam’s Top Leaders Commit To Stay Despite Disclosures By Founder Of Financial Irregularities
Hyderabad, INDIA, January 9, 2009: Satyam Computer Services Limited (NYSE: SAY) said today its top leaders have pledged to remain in the company and work jointly to steer the organization following shocking disclosures by its founder and chairman Mr. Ramalinga Raju of financial irregularities.
Ten of the most senior executives of Satyam, including interim CEO Mr. Ram Mynampati, gathered at its headquarters in Hyderabad, have collectively committed not to resign from the company which has approximately 53,000 associates. Approximately 40 other top managers from various geographical regions – known as the “Leadership Council” – have also given their commitment to remain in the company.
“The pledges of commitment from these leaders, coming hours after disclosures and the resignation of Mr. Raju, underscore the unity and determination of the Satyam leadership to steer the company through this crisis,” the eight leaders said in a joint statement.
The company will hold a press conference at 5 pm IST in Hyderabad to outline an action plan to address key concerns of various stakeholders including customers, investors, employees and business partners.
“Satyam is facing a major crisis in which the unity and clear strategic direction of its top leadership are of paramount importance. This collective commitment will serve to significantly assuage concerns of various stakeholders in a highly fluid and challenging situation,” the leaders added.
The eight top managers in the leadership team are:
Mr. Ram Mynampati, interim CEO
Mr. Subu D. Subramanian, Head, Manufacturing & Automotive
Mr. T.R. Anand, Head of Telecommunications, Infrastructure, Media & Entertainment and Semiconductors
Mr. Keshab Panda, Head, Europe, Energy & Utilities
Mr. Virender Aggarwal, Head of Asia Pacific, India, Middle East, Africa
Mr. Manish Mehta, Head, SAP & Testing Practices
Mr. A.S. Murthy, Head, Global Delivery and Global Leadership Development
Mr. Murali Venkataramani, Head, Commercial
Mr. Hari Thalapalli, Head of Marketing
Mr. S.V. Krishnan, Head of Human Resources
###
About Satyam
Satyam (NYSE: SAY), a leading global business and information technology services company, delivers consulting, systems integration, and outsourcing solutions to clients in 20* industries and more than 65* countries.
Satyam leverages deep industry and functional expertise, leading technology practices, and an advanced, global delivery model to help clients transform their highest-value business processes and improve their business performance. The company’s 52,865* professionals excel in engineering and product development, supply chain management, client relationship management, business process quality, business intelligence, enterprise integration, and infrastructure management, among other key capabilities.
Satyam development and delivery centers in the US, Canada, Brazil, the UK, Hungary, Egypt, UAE, India, China, Malaysia, Singapore, and Australia serve 690* clients, including 185* Fortune 500. For more information, see http://www.satyam.com.
*As of September 30, 2008
Safe Harbor
- Posted by Rajat RoyThis press release contains forward-looking statements within the meaning of section 27A of Securities Act of 1933, as amended, and section 21E of the Securities Exchange Act of 1934, as amended. The forward-looking statements contained herein are subject to certain risks and uncertainties that could cause actual results to differ materially from those reflected in the forward-looking statements. Satyam undertakes no duty to update any forward-looking statements. For a discussion of the risks associated with our business, please see the discussions under the heading “Risk Factors” in our report on Form 6-K concerning the quarter ended September 30, 2008, furnished to the Securities and Exchange Commission on 07 November, 2008, and the other reports filed with the Securities and Exchange Commission from time to time. These filings are available at http://www.sec.gov.
Satyam is a very big company and we are proud of it and its skilled employees. It will defenitely come out of it and continue to delight its customers ,all the support for Satyam.
- Posted by raneeU never knoe how many such other companies hav inflated B/S, its quite evident that most of the companies do inflate B/S although not to the extent of Satyam. Is this the end of India growth story… gotta wait n watch… FII will stay on the sidelines n watch wats in store… hopeful of a better corp gov…a shocker.
- Posted by AmzIt takes lots of courage to admit only he is at fault, it is more likely many company people had knowledge. PWC is an equal to blame being their auditors. I used to admire the soft spoken Ramalinga raju hope the company comes out of this crises without much damage.
- Posted by Leo HughMr Raju made millions by disclosing the facts since he had put option. Mr Yogesh an Indian of Happionaire has divulged and questioned there were motives for these divulsion. This is how small time honest investors are
- Posted by Altafcheated. Hence elementary education in investing is the need of the hour.
This could be just the tip of the iceberg, god knows who else in Satyam is involved and its the investors who take the grunt. This would make no difference to Ramalinga Raju or his family as they would have amassed all the wealth in the world to bail them out.
- Posted by KrazIts hard to believe that just Ramalinga Raju would take the blame and clearly states that no one else is involved. Shame…
- Posted by KrazTo Jon - “These companies have been profiting off cheap labor for years.GOD BLESS AMERICA - KICK EM OUT!” Your comments speak of your IGNORANCE and ARROGANCE. FYI None of the engineers that work in India are Underpaid in any way. Its the value of the doller that makes labour cheaper in India. You americans can never learn can ya ? You guys yap a lot but working hard and intellegence is not your forte is it ??When it comes to saving your own back side you dont care what happens and who dies in the world. Globalisation is an Americation Invention so LIVE WITH IT.America has earned Billions off it so why whinge
What happened with Satyam is not good , but atleats he was honest and was fortcoming unlike most American companies who dont even come forward until they go bust. This is a bad phase and will pass and satyam will come back ever stronger and harded.
- Posted by SandeepI think this entirething is nig fat lie tofool investigators and investors. Cash must have been generated at Satyam. It is better to claim that no cash was generated at all(inflating profits) as compared to answering the questions on cash that was used for personal purposes. If not all cash balance was inflated, some of it could have been!
Can anyone believe that Raju didnt profit from this entire episode? 3% operating margins for an IT company doesnt sound right. What would be interesting is the investigation into Maytas (the company owned by Raju’s son). I suspect that money was moved from one satyam to Maytas without anyone noticing. Maytas is supposed to have bought tons of Real Estate around IT hub in Hyderabad. Is anyone investigating Maytas? Atleast the news papers should!
It is a shame for Indian Corporations. What Corporate Governance are we speaking about? Also, Indian GAAP lags behind..it is archaic. Companies are run by people who run them not for the investors,but as their own personal fiefdoms. I also donot assume there will be much investigation into this entire episode to figureout how much money was really moved into their other personal ventures.
- Posted by Sa KuI still stand behind Satyam computer services ltd. Satyam is still focussed on customer delight. We will never compromize on anything promised to the clients.
I am here for satyam supporting it. It will deftly come out of this rough patch.
abdul lathif lamba
- Posted by abdul lathif lambaemployee: satyam computer services.
we know the deeds of ramalinga raju… predicted cashless cash existing on the balance sheet. balance less on balance sheet
- Posted by venkatno no this is not good to the market that is already detoriating not just india but for world market this comapany was many billon dollar bpo.i guess so this is beganing to start of cruel market i guess so i keep my finger cross
- Posted by rishi(london)I think it’s fantastic and about time. These companies have been profiting off cheap labor for years. Perhaps this will send a message to US based companies that currently do offshore employment.
The bigger question is, what and who is next? Immigration corruption? PWC was their auditor… How does something like this go unnoticed? They’re going to burn too.
GOD BLESS AMERICA - KICK EM OUT!
- Posted by JonSatyam is not a isolated case. I am a Chartered Accountant and know first hand cooking of the books is normal practice.Scorching profits suddenly evaporate at the onset of bear market.During the bull market most of the companies accumulate lots of toxics in their balance-sheets. How can one explain Reliance\’s gross rifining margines. Indian Stock Market is saddled with so many corrupt practices like round tripping(corrupt money going out via illegal channel and coming back as FII money, market manipulation before public issues etc. etc. Becuase of governmnet support and lax SEBI regulations and massive corruption, promoter/operator nexus has looted investors right and left.
- Posted by shashikantI am shocked.
- Posted by AdityaSatyam was - one of the favourite large-cap stocks for investors.
I am left wondering - if such things happen in a large-cap company, which is one of India’s top…What is going on in others?
But there is one thing - this further makes us understand what risk of Equity investing actually is… No company is safe..
As of 7 Jan 2009 14 Analysts had buy as stock rating for Satyam while 11 have outperform ratings, 6 Hold ratings and 0 Sell ratings…
http://aruninte.blogspot.com/2009/01/ana lyst-recommendationbuy-satyam.html
Thanx
- Posted by arun