Satyam has loose Rs 10,000 Cr in Market Capitalization

Beleaguered software services major Satyam Computers on Wednesday bit the dust on the bourses and lost as much as Rs10,000 crore in market capitalisation (m-cap) in a single trading session, after the scrip dipped to hit an all-time low level.

It saw a massive value erosion and fell nearly 80%, after the management revealed malpractices in accounting methods. The company had a market capitalisation of Rs12,067.98 crore on Tuesday and by the end of Wednesday’s trading session its m-cap stood at Rs2,691.88 crore.

The scrip, which fell by as much as 83% to witness an intra-day low of Rs30.70, managed to close with a fall of 77.69% at Rs39.95 on the BSE index.

“In the long run the scrip can witness levels down to as much as Rs20. The company was operating at a margin of 3%, the lowest by any firm. It was doing business on cost basis and the books were kept inflated,” Arun Kejriwal of Kejriwal Reserach and Investment Services said.

On the National Stock Exchange (NSE), the scrip plunged to a low of Rs41.05, down 77.06% from its previous close. The scrip had witnessed the day’s low of Rs30.80, down 82.78% over last closing.
The counter saw frantic selling after the news broke out, and over 48 crore shares had changed hands on both the bourses.

Satyam stock holds a 1.56% weight in the 30-share bluechip index - Sensex. Following the same, the Sensex also plunged over 749 points or over 7% to settle at 9,586 points on the BSE.

Ramalinga Raju, on Wednesday resigned as Satyam’s chairman after admitting to financial wrong doings in the company’s balance sheet. He was under attack over the $1.6 billion acquisition fiasco of firms promoted by his family.

Satyam Computers Chief Ramalinga Raju Resigns : Reports

Satyam Computers founder and chairman Ramalinga Raju had resigned from the board.

Satyam board meeting is scheduled for December 29. According to analysts, Mr Raju’s resignation wouldn’t make much of a difference to investors. “He is not to be blamed alone…the responsibility lies with the entire board. It was a unanimous decision and this board is in no place to decide on the issue,” said Prabhudas Leeladhar analyst Apurva Shah.

The resignation of the chairman, who is also the promoter of the company, could raise issues of succession, which is far greater than him quitting.Shares of Satyam were down 8.5% to Rs 148.60 on the BSE in intra day trading. The company’s shares have seen severe beating ever since the company board pushed through a decision to buy out two subsidiaries belonging to the promoters’ family. The Satyam board had to later reverse this decision following strong opposition from investors and shareholders.

Satyam Computer has loose Rs 5000+ Cr - Ramalinga Raju biggest fraud in India’s History

B. Ramalinga Raju has confessed that a huge sum of money is missing from Satyam. According to a confession letter he wrote to the board this morning, somewhere between Rs 5,040 crore and Rs 7,136 crore (part of the letter is open to two interpretations) is missing from the company.

According to Raju, this sum has not been embezzled or misappropriated. Instead, it never existed. The company has been lying about its revenue and profitability for years. These lies have now become too big to sustain. As the letter puts it, “What started as a marginal gap between actual operating profits 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?”

As this point of time, nothing can be said about the real state of affairs. As it turns out, Raju and others at Satyam have been telling lies for years. For all we know, this letter may be just be another layer of lies that is hiding more than it reveals. Certainly, the letter can’t be taken at face value.

The biggest question that arises is actually not on the role of Raju, but that of the company’s auditors, PricewaterhouseCoopers. Interestingly, PricewaterhouseCoopers, which is a USD 28 billion (2008 revenues) professional services firm headquartered in New York, appears to have actually started attempts to divert attention from its role a few days ago. Three days ago, some newspaper reports started that PwC will ‘review its continuance with Satyam Computer’. However, few would be willing to believe that such a huge, multi-year scam could have taken place without complete co-operation and connivance of the auditor.