What an irony that a company with a name like this did what they did. The implications and the fallout of this for the much vaunted Indian IT industry is massive. Not only the IT industry but Corporate India as a whole. And the timing couldn’t have been worse. There is the anti outsourcing lobby rallying together in the US, one the key issues in the Obama campaign, and then the recession that has just about hitting the world. This was the time when global companies would have been forced to outsource to India to manage costs and profitability. As early as 2004, the American media had reported that it was not only dreaded terrorist Osama whom the Americans were afraid of, but Ramalinga Raju was a feared man too as millions of jobs were being outsourced to Indian companies like Satyam. Just the right time for the nay sayers to chuckle, I told you so.
The letter by Ramalinga Raju conceals more than it reveals.
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1. The Balance Sheet carries as of September 30, 2008,
a) Inflated (non-existent) cash and bank balances of Rs 5,040 crore (as against Rs 5,361 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 overstated debtors’ position of Rs 490 crore (as against Rs 2,651 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 revenue) as against the actual revenues of Rs 2,112 crore and an actual operating margin of Rs 61 crore (3 per cent of revenues). This has resulted in artificial cash and bank balances going up by Rs 588 crore in Q2 alone.
Can you fathom what was the extent of fraud over here? There are three levels of audit in any listed company and how this passed across these levels and over so many years is unimaginable. -
He says neither he nor the MD ‘took even one rupee/dollar from the company and have not benefitted in financial terms on account of the inflated results’. Who is he kidding?
- It lists 17 senior executives and business leaders who he says were ‘unaware of the real situation against the books of accounts’. The most conspicuous name is that of the CFO. Is Raju admitting that the CFO did play a role, which is clear as day.
Imagine the plight of the 53,000 employees, where do they go from here? What about the auditors will there be action taken on them? Will the Rajus be treated differently from the regular accused? Or will they accorded privileges because they are blue collared?
We have always had perception issues in global markets and this will strengthen it. From exporting dried papaya seeds along with pepper, to passing off polished ordinary stone as granite our businessmen have done it all. My view is that there is atleast one more ‘IT bellwether’ that has skeletons in the cupboard. They are sickeningly sterile. It is just a matter of time.
I like the one clever line in the letter, “It was like riding a tiger, not knowing how to get off without being eaten’. How about some self sacrifice? One for over a million IT fellow cyber coolies.
