SATYAM FRAUD

At a time when corporate governance atleast vis-a-vis Satyam was at its lowest, the quitting of its chairman in the wake of the fraud is an absolutely crashing blow. The Satyam shares have been tanking since the times news has come out almost crashing to 80% of its value. A fraud to the tune of 7100 crore would shake up the trust factor in the market which showed some signs of rallying back. After the disclosure BSE index have tanked almost 600 points. The impact it has on the further role the FII's and FDI's could be disastrous

In a letter addressed to the board members, Raju admitted his wrongdoings absolving everyone apart from the MD of any part in the fraudulent ways. It however seems very improbable that without the help of atleast certain quarters the whole fiasco could have been carried out.

Seemingly a 3% operating margin was inflated to almost 24 %. There also are reported bank balances with 5000 crores of cash that never exists. The balance sheet almost show no cash. Even worrisome could be the loss of clients and the payments assoviated with the work already done

What however seems a bit odd is that Satyam being one of the leaders in the IT league were operating at a mere 3% profit.Satyam if anything was the 4th biggest IT firm in India. If thats the margin the the 4th largest IT company operated at serious doubts can be raised regarding the profitability of IT ventures. Then again in the facade that Raju has pulled through the operating margins too could be cooked up. A thorough audit into the Satyam books would reveal the truths.

The role played by the auditors in this case is quite baffling. Either they were hoodwinked in a beautiful manner or they were complicit in the whole affair. How they missed 5000 crore cash that quite never existed is quite bizzare.

On a short-term basis the stakeholders, especially the smaller ones, would have taken quite a hit. There seems to be no way for them to recover their money. Suspending trading on the stock wont be the right way to go considering there still might be investors who want out of the stock. The 50000 strong workforce of Satyam would be worried and rightly so. Their futures are in a limbo for sometime to come.

One hopes the SEBI and the other concerned authorities take the stringest possible action to avoid the occurance of such a scandal again and restoring the confidence of the investors in the market. Is this the end of the road for Satyam..only time shall tell..