"If I could turn the page
In time then Id rearrange just a day or two
Close my, close my, close my eyes"
Fleetwood Mac
India’s Satyam chief resigns, says profits inflated
BANGALORE (Reuters) – The chairman of India’s embattled Satyam Computer Services (Bombay:SATY.BO – News) resigned on Wednesday and said the company’s profits had been inflated over the last several years, sending the stock down 60 percent.
The shocking revelation comes after India’s fourth-largest outsourcer’s botched attempt last month to buy two construction firms in which the company’s founders held stakes and key customer World Bank dropping its ties with the outsourcing company.
"The gap in the balance sheet has arisen purely on account of inflated profits over a period of last several years," Satyam Chairman Ramalinga Raju said in a statement to stock exchanges on Wednesday.
Satyam’s woes make it one of India’s most high-profile company scandals in recent years. The comments from Satyam sent Indian equity markets in a tailspin, with Bombay’s main benchmark index (Bombay:^BSESN – News) falling 3.9 percent…
"I think there is no future for this stock. This case for India is similar to what happened to Enron in the U.S.," said Jigar Shah, senior vice-president at Kim Eng Securities… continue here.
Satyam (NYSE:SAY): The Short Story – First Global India
Courtesy of Notable Calls
First Global India has a nice comment on SAY this morning:
Let’s say one thing upfront: we think Ramalinga Raju is an amateur. He is not the first promoter in the world to have cooked the books. Nor will he be the last.
But the weird mea culpa letter is something that is bizarre to say the least. This is not the way professional scamsters work. We doubt if there has ever been an instance of a promoter sending in a letter like this, right upfront. Jeff Skilling didn’t do it. Bernie Ebbers didn’t do it.
So, Mr.Raju was neither a good promoter nor a good scamster. And that is the final writing on his epitaph.
What happens to Satyam now?
It’s history.
The stock could go to zero or near-zero.
After all, no US IT major will go near it to sniff at Satyam’s books. They will need to hire one of the Big Four Accounting firms for a due diligence! Think about that…
No. Satyam is way too risky a deal. Clients will walk. Key employees will walk. There is no cash worth the name, on the balance sheet. And the so-called “genuine” is loss making. As stated in Raju’s letter, Q2 FY09 had an OPM of only 3%…which means the overall business of Satyam is loss-making, at the net level. And is also cash negative, as is clear from Raju’s letter that he was pledging stock to raise money to keep Satyam’s operations going.
So all holders out there: get out while you still can. This stock has a bottom that you don’t want to see materialise.
Notablecalls: What can I say? High five to ABN Amro for upgrading SAY to Buy from Sell yesterday.
Shareholder’s Song
