panch-tattva talk…a-satyam

Friends,

Mr Raju of Satyam Computers dropped a bomb-shell today by declarinf that he had been fabribacting accounts and cooking books for many years and that there is a cash shortfall of more than Rs5000 crs which is wrongly reflected in companies books. He has admitted to overstating receivable and billings. He has also taken full responcibility for the wrongdoing and offers to be treated in accordance with law of land. The stock exchanges were informed of this in the afterneen today. The Satyam stock was down 80pc to 40 and the Nifty lost a good 180 points. Surprisingly the other IT majors were not harmed at all.

The extent of amount involved and the time over which the tempering went on make one wonder as to what use are statutory auditing provision, what do the FII analysts do when they grill the managements before investing, how do the Income Tax people complete assessments , what do the fellow directors do, how employees never have any inkling and what do a ’serious fraud office’/'economic intelligence wing’ do. What is the purpose of publishing information on the stock-exchange sites when it may be all wrong and allow the wrong-doers make profits in day to day trading. What point in having SEBI like organisations who can hardly protect the investors.

I praised the Satyam management for quick withdrawal of merger proposition when investors raised hue and cry. I wonder why they were trying to do when proposing to merge a company with missing cash with their own company other company. Howmuch money may have been made by some and lost by some on bourses (T/O Rs80K today at NSE). Should any investigation not be initiated and links found by looking at the activities of big traders and position taker during last month till today. The gains of suspected people should be impounded forthwith. I have reason to believe that besides the revealed fraud there is further scheming involved to make gains on bourses. The timing of the revealation, the recent surge in Satyam price after a big fall and tomorrow being a trading holiday and things like that are pointers in that direction. Only yesterday I told you to be wary but patient about any adverse development/news flow. In fact I am seeing a hand behind the activities on worlds exchanges around the world ( I notice it particularly in India).

I have also told you earlier that Indian managements leave much to desire and have thier on ends to serve first. Whenever I notice any such thing I do not keep it to myself but also give readers any idea. To my surprise the later developments confirm the matters about which I raise any eye-brow. What pains me that even the so-called respectable houses also do not pass the test of 100pc honesty , in some smart ways they to take the gullible sleeping pertners for a ride.

Coming back to Satyam episode, I may tell you that the propriety demands that Raju is given maximum terms in shortest possible time after a quick trial and he should go along with the key employees of Satyam, the board memebers, the auditors and the negligent govt officials (some of whom may have had benefits in exchange for looking away).Unless some thing is done on war footing in this matter, the whole game of stock investing will remain spoilt. I am also sure that the culprits have money and would buy favours and what will be done will be to only pass time and eventually dilute the whole matter.Even media would stop raising the issue before long and would help bury the hatchet.

Lastly ,if Satyam has any debt on books , the banker involved also will have to answer many a questions. The ICICI Bank and HDFC Bank chiefs have expressed surprise at the development,if they have been Satyam’s bankers they have also to look at the ways they try to know their customers.

Now let us see the tax angle. Satyam has been continuously paying corporate tax. There is in fact no factual income in hands of Satyam for many years and therefore as measure of relief to shareholders it is Finance Minister’s duty to refund all the tax money the govt has received for all those past years. Should this happen Satyam as a company would be saved and those who have suffered for no fault of theirs would have a sigh of relief. Let’s see if the govt sides with the people or not while part of the blame does lie at the door of govt. also in some way.

HariOm,
krsnaKhandelwal