Wednesday, January 07, 2009

Slumdog Billionaire - Truth be told

"The aborted Maytas acquisition deal was the last attempt to fill the fictitious assets with real ones," Raju said in his letter. "I am now prepared to subject myself to the laws of the land and face consequences thereof."


If there is someone who knows to tell a dramatic story, it is B. Raju. Thanks to Anon for the post where the Satyam CEO announced in painless detail the Satya(m) of the balance sheet. Satyam as most employees will attest is a sweat shop. Employees in the US work ridiculous hours and get peanuts for all their efforts. I'm not sure how employees in India are treated. It goes without saying that Satyams's customers will switch to other outsourcing companies and I wont be surprised with US based companies get the right to choose customers as opposed to the India big three. It also looks like we can easily see a layoff of 50% of the workforce in Satyam. What happens to all the mortgages which have been sunk into Hyderabad real estate ? As we saw the stock market took a beating down 750 points, Satyam investors have been wiped out. This is just beginning to get ugly. Maytas and Satyam will be remembered as Worldcom and Enron. The last straw which broke the market's back. Wonder how many more books are cooked by Indian management. The auditors are a joke. God save outsourcing.


Here is good analysis on how the books were cooked.

Here is Raju's candid letter to the SEC. Without regret or remorse, the criminal has bankrupted the company he has founded and will bring Hyderabad to its knees.

17 comments:

Anonymous said...

What a shame. All involved should be punished. How many people will lose jobs now. And all the retirement benefits etc.

It is a matter of shame for all of India that the industry the whole country was so proud have was fraud.

HB

Anonymous said...

Satyam fallout: Governance worries pull realty players down

http://economictimes.indiatimes.com/articleshow/3949454.cms

wb92 said...

The auditors have always been a joke. The pressure to retain these huge accounts is enough for them to turn a blind eye, if not become complicit in fraud. The same applies for the rating agencies as well. Regardless of examples set by the Worldcoms and Enrons from the last decade of excess, greedy sheeple investors will never learn.

In the long run, companies that realize providing truthful information and being accountable are in their own benefit will prosper, others will fizzle out.

Moral of the story: Own up your mistakes and take the punishment right away. Trying to cover it up will only worsen your suffering.

wb92 said...

Almost forgot: This whole 'candid confession' stinks. This may only be the surface and reveal more skeletons deep down. I believe Mr.Raju is sacrificing himslef to save a lot of other cronies. You live by the sword, you die by the sword.

This turkey is cooked. Valuable and sustainable parts of the company will be picked up by others once the dust settles and liabilities become clear. 20% of the payroll will be gone, to reflect the 3% 'true' margin.

I do feel bad for the folks in the trenches and wish them good luck.

Anonymous said...

Will Satyam kick start the Indian economic recessionary rally?
--Satyam is not only representing the IT Industry, but it’s a more of a corporate giant from Emerging market.
--In International market it has very different implication towards Indian corporate image & raising concern about other corporate governance.
--NYSE has blocked the trading in Satyam’s scrip.
--Now foreign investors are worried about other similar cases.

One noticeable cause to reveal this fraud is real estate company Maytas.

This is just the beginning of bad news, market has to absorb some more bad news to show it’s resilient. Agree this is not the first bad news but scale wise this the biggest.

Whether you need house for self use or for speculation doesn’t matter, when every one knows prices are/will go down further, why you want to take downside risk?

So guys let it fall then only pick up, minimum 50% price cut is guaranty.

Vulture.

Anonymous said...

I had invested in Satyam's ADR and today due to lies of this company I lost close to $37,000. I never sold the shares even when they were slightly under $10 thinking that I'll keep the hold strategy for 5 years or so.

I'm going to go short on all ADRs from India now.

Looks like it is a chain of fools in India who didn't take any lessons from Enron.

HB

Vik said...

HB,

my sympathies for your loss. I hope your corpus is large enough for you to write off this fiasco.

Face the nation has a great discussion on the scam

Greed at its worst as one of the panelist calls it.

http://ibnlive.in.com/videos/82210/01_2009/ftn0701_2a/control-z-save-indias-it-from-corporate-monsters.html

Anonymous said...

HB

Sorry to hear your loss. I don't think individual stocks are for retail investors - particularly Indian stock. God knows what the rest are hiding.

Anonymous said...

Vik,
The US tax write off allows only
3K per year in taxes. I'll have to carry this burden now for like 12 years. I'm really pissed at those liars who dupe naive investors.

As Obama said today that he doesn't like bubbles, I hope last 8years of bubbles in all sectors are corrected and normal people like me can lead a normal life. These greedy bastards all over have screwed up everything from housing to everyday consumer items, stock prices and jobs.

SHame on everyone especially to India where the country is run by a Harvard PhD and former Finance Minister Mr. Chudambram also did his graduate studies in US.

HB

Vik said...

I guess there is not much you can do expect to make some profits in 2009 which you can write off against these losses.

On a different note, people need to look at other companies like Reliance Power. The stock is now at 110, quarter of what it was when it went public.

Indian stock market brokers have perpetuated by the largest scam on the citizens. I see the market down to 5000.

Observer said...

Vik, can you please post this article on the front page. This is a revelation of the very important real estate-politician-corrupt businessman link in India.

Raju did not confess just to clear his conscience. There is speculation that Satyam's profits were being used to prop up realty acquisitions for Maytas (which won the Hyderabad Metro contract). Politicians had a stake in the real estate close to the project, and because of the real estate downturn, they demanded their money back. Raju was forced to confess to stop the revelation of the political names behind the entire scam. Sreedharan (director of Delhi Metro) had said that the entire Hyderabad Metro was a land scam.
Raju accepted 7 years in Jail as a deal from the politicians, otherwise, he and his family would have been eliminated in some "accident".


Brokers on this board like Abdulla, Sabbalseshu, Ashish, always keep saying there is no politician-builder nexus. Well, here is a spectacular result! Read the entire article from ET below.

Satyam land scam


Industry and banking sources said the Rajus leveraged their ownership of Satyam, both in terms of shareholding and management control, to fuel other businesses. In fact, one banking source surmised that a key reason for cooking the books could have been to leverage the bull run in the Satyam stock before the market meltdown in the second half of 2008.

The promoters may have needed cash for land acquisitions
, particularly around their infrastructure projects that were won on the back of ‘goodwill’, according to these sources.

So how did the Rajus land up with a severe liquidity crunch? One of the theories doing the rounds suggests they were trapped by a murky cocktail of political developments and a real estate crash. In the recent past, Maytas Properties and Maytas Infrastructure had won a number of prestigious projects.

These include the Hyderabad Metro Rail project, Machilipatnam port project and airport projects in Andhra Pradesh and Karnataka. In return, prime land near some of these projects had to be ‘offered’ to the supportive establishment. Several real estate sources claimed there were some instances of Maytas being awarded road projects even without proper bidding. However, ET could not confirm all this independently at the time of going to press.

With the real estate story turning sour, political circles were said to have demanded funds from the family instead of land. “Upcoming elections may have also forced members of the establishment to change their preference from land to money which put them in a fix,” said a Hyderabad-based developer.

Observers said Raju’s sudden admission of fraud had compelling reasons, and was probably done under external pressure to thwart bigger revelations.

In this context, it must be mentioned that Delhi Metro managing director E Sreedharan had called Hyderabad Metro Rail project a “future political scam”. He had objected to the way the government allowed the private consortium to develop land.

Anonymous said...

I know the quality of this blog... U dont get time to watch any good debate... Whats the point in watching sagarika ghosh debate (Most useless and hopeless one)...

Vik really what happened to you? Stooping so low to watch a debate on ibnlive

JB said...

This is unfortunately not the only scam satyam is involved in. A bigger scam of 10,000 crores would need CBI investigation. This is to do with EMRI owned and promoted by satyam to provide emergency ambulance services across the country promoted actively by anbumani ramdoss the crook health minister and this was awarded to satyam without due diligence or even tendering and it was widely known 10%(1,000 crores was the kickback). these skeletons too need to tumble out of the graveyard of satyam

Anonymous said...

There is more to come from Satyam. But if you look at the media there will be some other news item which will waylay the media glare and people will move on. Chalta hain, yeh India hain nah! Like 26/11 is being forgotten as we speak, so will the crooks at Satyam and politician friends. This is not being cynical. This is truth. Satyam as one would say.

From Shivam Sundaram (but sans Satyam)

Anonymous said...

Do visit this blog - for more on Satyam

http://www.sathyamurthy.com/2009/01/07/satyam-fraud-unravelling-the-mystery/

Vik said...

Anon:
The corporate lawyer made some good points on the legal impllications. I'm no lawyer and so are a lot of people who visit this blog. What all of us have is common sense.

In fact I'm becoming very disillusioned with the corruption in India. It is just too overwhelming to see how the country is being looted by its citizens. In 1947 we had the British to blame. Now we have nowhere else to look. We are a corrupt nation period!!!

Raj said...

I absolutely agree with Vik that the root of all that ails us is the deep rooted corruption which has now become so institutionalised that none of us can claim to be in some way not responsible for propogating it. How many of us can resist not paying the cop for a traffic offense so that u save 100 bucks, how many of us hesitate to pay something extra so that we can get 'ahead' of the queue. It is surprising we have not declared war on corruption which is as greater an evil as terrorrism. Every appointment of head/director/VC of any substantive post is given to the highest bidder. People who work in govt. institutes are only too aware that merit or seniority counts for nothing for getting the top post. In my opinion the biggest post independence disappointment for the country was that BJP which had a hsitoric oppurtunity to correct cancer of corruption took it to greater heights to fill its coffers and I personally know how every standard was diluted to make a RSS functionary head of a major central institute ahead of atleast a dozen more qualified and merited persons.WE SHOULD PLEDGE TO DECLARE WAR ON CORRUPTION- everybody feels the same, unfortunate thing is nobody seems to know how- we require somebody of the stature of a Gandhi to credibly lead us.