Satyam computers is among big four IT outsourcing giants in India {don’t know if this holds true! now}. Being a public company it is difficult for any firm to manipulate things at this level. In last quarter the company filed debt close to 5,000 Cr, which could be under stated by the company as well. E&Y was third party auditor which signed the filing made by Satyam in previous quarter. Now since everything is in public, however still some dust needs to settle before everything comes out. I believe following events will take over -
1. Satyam’s ADR and Satyam Computers could face de-listing from various exchanges, the company has lost credibility. Satyam ADR at NYSE closed at 0.01 yesterday down 99.89% intraday. I was surprised to see this didn’t happened with Satyam Computers at BSE/NSE.
2. E&Y partners might loose their license, however, the bigger implication will be they will loose contracts and business going forward. Even if they somehow get rid of legal battle, it will be very difficult for them to regain confidence.
3. Satyam might have to sell off some of its stake to raise cash, as Raju already said 55,000 Cr of cash reserve is fake, now after the filing the Company has busted some of its negative covenants, the creditors will might enforce liquidation of some assets in the Company.
4. Satyam also have to reduce its work force, given they might also be loosing contracts and clients going forward, they will be under major restructuring phase in 2009.
5. Satyam might also face a ban from big banks and PE funds, given the fraud in cash reserve they have, it will be very difficult for the Company to raise any cash for operations going forward.
Last year, before Diwali there was an interview of Alan Greenspan aired, he said “This is once in a millennium like situation, probably we might not see anything close to this in our lives”. At least this stands true for me, 2008 was full of events, and 2009 started with Satyam blockbuster!
Vivek Misra
