SATTYAM: AN INDIAN VERSION OF WORLDCOM
I am of the veiw that we should not panic by the exaggeration of the Satyam issue made by media and wait till any official statements from SEBI, Ministry of Company Afairs, The Institute of Chartered Accountants of India.
Satyam is the country’s fourth largest IT firm and has over 51,000 employees. B. Ramalinga Raju
Chairman, Satyam Computer Services Ltd (now resigned) in his letter to Board Members expressed that it had a great burden on his conscience. Through this letter he brought the following fact into limelight.
1. The balance sheet carries as of September 30, 2008
a) Inflated (non-existent) cash and bank balance of Rs 5,040 crore (as against Rs 5361 crore reflected in the books)
b) An accrued interest of Rs 376 crore which is non-existent
c) An understated liability of Rs 1,230 crore on account of funds arranged by me
d) An over stated debtor position of Rs 490 crore (as against Rs 2651 reflected in the books)
2. For the September quarter (Q2) we reported a revenue of Rs 2,700 crore and an operating margin of Rs 649 crore (24 per cent of revenues) as against the actual revenues of Rs 2,112 crore and an actual operating margin of Rs 61 crore (3 per cent of revenue). This has resulted in artificial cash and bank balances going up by Rs 588 crore in Q2 alone.
The gap in the balance sheet has arisen purely on account of inflated profits over a period of last several years (limited only to Satyam standalone, books of subsidiaries reflecting true performance). What started as a marginal gap between actual operating profit and the one reflected in the books of accounts continued to grow over the years. It has attained unmanageable proportions as the size of the company operations grew significantly (annualized revenue run rate of Rs 11,276 crore in the September quarter, 2008 and official reserves of Rs 8.392 crore). The differential in the real profits and the one reflected in the books was further accentuated by the fact that the company had to carry additional resources and assets to justify higher level of operations – thereby significantly increasing the costs.
Raju further said he or the company’s MD did not take “even one rupee/dollar from the company and have not benefited in financial terms on account of the inflated results.”