Saturday, January 31, 2009
The government has sounded Mr Karnik out on its plans to appoint him as Satyam’s chairman, said a government official, who asked not to be named. Mr Karnik’s colleagues on the board have told the government that they have no objection to his appointment, the official said.
When contacted by ET, Mr Karnik said, “I can neither confirm nor deny it.” Mr Karnik, who headed Nasscom from 2001 to 2008, is a respected figure in the IT industry. His appointment as chairman at Satyam could help control the damage done to the firm’s image and reassure its major clients, the government official said.
The government had dissolved the original board of Satyam on January 9, two days after a sensational confession by its now-disgraced founder B Ramalinga Raju that he had fudged the company’s accounts for years. The government initially appointed a three-member board with Mr Karnik, HDFC chairman Deepak Parekh and former Securities Appellate Tribunal chief C Achuthan as members.
It was expanded later with the induction of three more members, CII chief mentor Tarun Das, former ICAI president TN Manoharan and LIC’s S Balakrishnan.
No chairman has been appointed as yet, and the directors have been taking turns at chairing the board meetings. The government now feels that it would be better to appoint a permanent chairman who could be identified as the public face of the company and speak on board-related issues.
Mr Karnik also serves on the board of other firms, including BPO firm EXLService Holdings. His appointment to the Satyam board had earlier led to concerns over potential conflicts of interest, but it was later clarified that EXL and Satyam don’t compete with each other.
Apart from EXL, he also serves on the advisory board of venture capital firm IDG Ventures India.
is unlikely to exist in its current form, according to a study by research firm Gartner.
It is expected to discontinue some of its businesses, service lines or cease to exist in certain geographies by 2010. The study indicated that even the name Satyam may not be around by that time, as the company is expected to undergo a complete change, in ownership and organizationally.
Satyam’s ability to sign on new clients during 2009 has significantly diminished, says the study. ‘‘In addition, it will be challenged to invest in client engagements, staff developments or R&D, all critical elements for IT services,’’ said Gartner’s V-P for research, Frances Karamouzis.
For the study, Gartner interviewed representatives of over 30 top Fortune 500 clients of Satyam, 20 top non-Satyam clients, the board of Satyam and CEOs of six tier-I Indian IT firms including TCS, Wipro, Infosys Technologies, Cognizant and HCL.
Many respondents felt that the job of a new chief executive officer or COO or CFO of Satyam will be extremely demanding as holding the existing clients is going to be a tough task. Also, with a monthly payroll of more than $125 million and dire cash flow issues, the future does not bode well for the company.
In response to queries about the contribution of Citi, Merrill, Novartis, and GSK’s contracts to Satyam’s revenues and the impact on the company if they were to move out, a Satyam spokesperson said: “We don’t comment on individual contracts. However, we believe that none of these are material.”
It is learnt that Citigroup, the second-largest client of Satyam contributing to over $60 million in revenue, is in the process of moving away part of its contract to other IT vendors like Wipro and TCS. A senior Citi official confirmed this, on condition of anonymity.
It is understood that small parts of the application, maintenance and development (AMD
) work is being moved away. However, when contacted by ET, a Citigroup spokesperson said: “Satyam is among several vendors providing IT Services to Citi. We are unable to share any more details regarding the nature of this relationship due to reasons of confidentiality.” TCS and Wipro too declined to comment on individual clients.
Wipro is likely to benefit the most from this as it had recently acquired Citi Technology Services (CTS), Citi’s captive providing critical technology infrastructure support, development and deployment of strategic software applications.
It is also learnt that Merrill Lynch, which contributes close to $50 million in revenues to Satyam, is sending in its own team of experts to the company’s headquarters. This team will meet senior officials next week to assess the situation. A Merrill spokesperson declined to comment.
State Farm Insurance, Satyam’s oldest and among its top 10 clients contributing around $50 million per year, had announced in January 2009 that it had terminated its contract with Satyam. A person familiar with the deal said TCS and Patni were the front-runners to acquire this contract.
Satyam provided AMD services as well package implementation to the US-based insurance company. When contacted, Patni declined to comment on the development.
Novartis and GSK are also believed to be shifting some of their business away from Satyam. Industry sources told ET that Novartis was likely to move its business to its back office in Hyderabad.
GSK contributes around $30-40 million per year to Satyam and is one of the top 25 clients of the company. A Satyam employee, on conditions of anonymity, said that should Novartis and GSK shift their business, it would deal a big blow to the company.
Wednesday, January 28, 2009
The Cabinet Committee for Economic Affairs is expected to meet Wednesday evening to take this decision, given the cheap crude prices in the global market.
The Government had last cut petrol prices on December 5 by Rs 5, and diesel rates by Rs 2 a litre.
Crude oil had climbed to a record high of $147 a barrel in July, but has since come to $40 a barrel level.
Tuesday, January 27, 2009
The company had a net profit of Rs607.60 crore for the same quarter FY 08, the mining firm said in a filing to the Bombay Stock Exchange.
On a standalone basis, the income from operations rose to Rs1,497.33 crore for the quarter under review, against Rs1,215.43 crore for the same quarter corresponding year.
However, for the nine months ended 31 December, the company has posted a net profit of Rs1,446.53 crore, against Rs739.33 crore for the same period last year.
Shares of Sesa Goa were trading at Rs73.25, up 7.33% on the BSE
The company was the highest gainer on the BSE with volumes of 510,507 shares as against two week average of 31,8200 shares.
Amongst the broking firms, it would be the second firm to consider buy back of shares after Indiainfoline announced their buy back plans in December.
Monday, January 26, 2009
Ramalinga Raju admitted to fudging accounts the IT firm could have been left with just Rs 200 crore of maturable fixed deposits.
The scam-tainted firm had short-term or long-term fixed deposits of over Rs 3,300 crore, and another Rs 300 crore of accrued interest, in addition to current account deposits of over Rs 1,800 crore, as per the last auditing done by Price WaterHouse for the quarter ending September 2008.
The company is believed not to have made any term deposit after mid-February 2007, though it did make a few short-term or margin money deposits, amounting to about Rs 10 crore till September 2008.
The auditing was done on the basis of statements sent by a host of banks detailing the fixed long-term deposits, along with maturity, ranging between October 2008 and February 2009.
With such a cash and deposits position, the IT company should not have had any worry on the cash front and a concern to mobilise resources for the payment of salaries to staff.
In his statement on January 7, Raju had said that he was disclosing the manipulation of accounts after failing in his last-ditch effort to salvage Satyam through acquisition of the two Maytas firms on December 16.
However, the bank statements, on which PWC relied for the auditing, reveal that more than 90% of the total deposits had matured by January 7.
Price WaterHouse, whose two top officials were arrested by Andhra Pradesh Police yesterday, is understood to have prepared its defence on the basis of these documents, besides foreign exchange earnings and receivables of Satyam, as per the export clearance documents of Software Technology Parks of India.
According to the available information pertaining to deposits of the company, Satyam had a total long-term deposits of over Rs 3,300 crore for maturity during the October- February period, while its short-term deposits to mature till October 2011 were about Rs 10 crore.
According to the statements, deposits were largely held with HDFC Bank, HSBC, ICICI Bank, BNP Paribas and Citibank, while the current accounts were mostly with Bank of Baroda.
PW officials are understood to have given these documents to probing agencies to make clear their role while maintaining that they had gone by the book for the purpose of auditing.
While no comments could be obtained from PW on the details of the bank deposits and cash position with the company, sources in the know said that it would be impossible to forge all the bank statements that were addressed to the auditor but procured by the Satyam management for auditing.
After arrest of its two partners yesterday, the auditing firm said it has fully cooperated over the last fortnight in all inquiries and "has provided all the documents called for by the Indian authorities" and promised continued cooperation.
"We greatly regret that two Price WaterHouse partners have been detained today for further questioning. We do not know the basis for them being detained," said a statement from Price Waterhouse, the statutory auditors of Satyam Computer.
PW's Chief Relationship Partner S Gopalakrishnan and Engagement Leader Srinivas Talluri are now in judicial custody pending investigation.
The practice, popularly known as round-tripping of investments, was rampant in the early 1990s, where many domestic firms used the Mauritius route to open shell companies and bring back money to evade taxes. These investors could escape tax, since Mauritius does not tax capital gains on profits from sale of shares.
Investigating agencies now suspect that Raju may have siphoned off thousands of crores overseas through irregular or fictitious foreign exchange transactions to launder money. “The (laundered) money could have found its way into India from Mauritius through sub-accounts of FIIs and then invested in assets here.
We are sounding out the foreign tax division, as round-tripping of investments through Mauritius is illegal if the source of funds are questionable,” said an official with an investigating agency who did not wish to be named.
After Dubai began attracting investments, some Indians have also opened shell companies in Dubai’s free-trade zone.
Money is remitted from India to these entities and brought back as investments in shares and properties after a year or two.
While these transactions look like disconnected genuine inbound investments, they are a camouflage for laundering money.
The Enforcement Directorate is understood to have been roped in to look at possible violation of the Foreign Exchange Management Act. “Investigating agencies may also ask details from banks which were collecting export receivables from Satyam,” the official said. Any evidence of money laundering by Raju will come under the purview of the anti-money laundering legislation as well.
Raju had confessed on January 7 that the firm’s books were fudged to inflate sales, profits and cash balances in a scam estimated at Rs 7,000 crore. Later, the firm’s former chief financial officer Vadlamani Srinivas claimed that there were only 40,000 employees (as against the claimed 53,000) and that Rs 20 crore had been siphoned off into several fictitious salary accounts for over four years.
The shocking revelations have created a huge uproar and raised questions about corporate governance at some of India’s top-performing companies. It comes at a time when the Indian IT sector - the poster boy of the country’s stunning economic success in the past few years - is struggling to cope with slowing demand in some of its biggest markets.
Agencies are looking at whether the money was remitted overseas under the garb of onsite salary payments. The new six-member board of Satyam, however, said last week that there was no prima facie evidence to doubt the employee count.
EAS Sarma, former secretary of the department of economic affairs (DAE), had earlier asked the central board of direct taxes (CBDT) if it had investigated specific cases of major ventures such as SEZs, IT projects and the Gangavaram Port near Visakhapatnam, where investments were made through Mauritius-based agencies.
“I have asked both RBI and Sebi under the Right To Information Act about Mauritius-based companies that are reported to have links with Satyam and other companies operating from Andhra Pradesh,” he said.
In a letter to the prime minister earlier this month, he said: “Satyam and Maytas represent only the tip of the iceberg. There is perhaps large-scale cross-border money laundering that needs to be traced and the culprits be brought to book.”
Sunday, January 25, 2009
Larsen and Toubro (L&T) on Friday announced that it bought 7.56 per cent (5.09 crore shares) of Satyam Computer Services shares through open market, taking L&T’s stake in Satyam to 12.4 per cent (8.11 crore shares) of the total shares.L&T bought 1.18 crore shares at a price of Rs. 35.07 per share through a bulk deal, the company informed the Bombay Stock Exchange.
With L&T’s holding having increased three fold to 12%, there has been some curiosity about the company’s decision to make the investment in Satyam. While the earlier 4% was acquired for about Rs 400 crore, the later 8% was acquired for Rs176.42 crore, taking L&T’s total investment in the company to about Rs 575 crore. Importantly, after Raju’s confession, some of Satyam’s shareholders like Lazard and Aberdeen have sold their holding albeit at a loss. The value of L&T’s holding too has dropped substantially in the process .
Why did L&T decide to make this investment or how will it make a difference to its subsidiary, L&T Infotech are just some of the issues that are being raised.The move has been described as “audacious” and “desperate” within corporate circles, with sources maintaining that L&T is merely keen to make good the hefty outgo for the initial four per cent which had caught its top management off guard.
It needs to be stated that L&T Infotech was set up in 1996 and has about 10,000 employees. In terms of revenues it grossed Rs 1,574 crore for March 2008 and has clients like Chevron, Hitachi, Sanyo and Lafarge.
L&T Infotech, which started off by catering to the demands of its parent company, is today a name in the infotech business. It is known for its integration of ERP with areas like plant maintenance, production, materials management, logistics and quality management systems.
S. Gopalakrishnan and his deputy, Talluri Srinivas, had signed Satyam’s annual statements of accounts without performing their statutory duties as external auditors, a senior CID official told The Hindu.
Citing a specific charge, he said they had accepted the forged fixed deposit receipts and particulars of balances furnished to them by the company without verifying them with bankers.
Prosecutors informed the court in the last few days that BNP Paribas had denied holding fixed deposits of Satyam Computers that were reflected in the company’s accounts. Earlier, HDFC, Basheerbagh branch, said it had no documents which were on the auditors’ files.
The official said the audit firm was paid an annual fee of Rs. 5 crore as compared to a maximum of Rs. 2 crore incurred for the same job by other IT majors. With the arrest of the two auditors, the number of persons held in the Satyam fraud has gone up to six.
During the arrest of the two auditors, the CID recovered several documents from the office of Price Waterhouse at the Madhapur Hi-Tech City here. It also summoned several middle-level managers of Satyam Computers to the office of the Director-General of Police for questioning. The investigating agency is sharing information with the Serious Fraud Investigation Office (SFIO) which has seized documents of Maytas Infra and Maytas Properties — companies run by the sons of the former Satyam chief, Ramalinga Raju.
In its investigations, the SFIO found a mismatch between the trial balance (the balance in the account after a transaction) and what was claimed by Satyam in the current account number 00120559 New York branch of the Bank of Baroda. The difference was Rs. 1,733 crore.
A conviction for fraud, if proven, carries a maximum sentence of seven years in prison and that for criminal conspiracy can range from a few years to life imprisonment.
They were remanded in judicial custody till February 6.
A lawyer to represent the PwC partners was flown in from Chennai. The functioning of auditors has come in for sharp scrutiny since the Satyam scam broke, with comparisons being made between PwC and Arthur Andersen, the auditing company than went down with Enron.
PwC initially claimed client confidentiality. But later, sought to absolve itself of all responsibility. Those sympathetic to the company are insisting that collusive fraud is extremely difficult to detect but others say that the auditing company cannot be absolved of charges of not revealing the true financial position of the company especially since they were its auditors from 2000 to 2008.
Saturday, January 24, 2009
Total income of the bank, during the quarter, grew to Rs 10,351-crore from Rs 10,338-crore in the same period in last year.
Thursday, January 22, 2009
company to the two real estate firms promoted by his family, state police sources said here on Wednesday.
Raju, who was grilled Wednesday for the fourth day by officials of Criminal Investigation Department (CID) of Andhra Pradesh police, also reportedly admitted using the Satyam money to buy prime land in and around Hyderabad.
CID sources said Raju told interrogators funds were diverted during the past four to five years. This means Raju's Jan 7 statement that he inflated company accounts was a red herring.
While resigning as company chairman, Raju had admitted to a Rs.70 billion (Rs.7,000 crore/$1.43 billion) accounting fraud, saying the company had cooked its books over several years resulting in inflated (non-existent) cash and bank
He reiterated this during CID interrogation soon after his arrest January 9. But investigations have now revealed that a big chunk of this money existed but was diverted to other firms.
CID, which took Raju, his brother and former managing director B. Rama Raju and former chief financial officer Vadlamani Srinivas in custody for four days following a court order, grilled the former Satyam boss on the basis of his confession.
After prolonged interrogation, Raju finally admitted to diverting Satyam funds to his family firms — Maytas Properties and Maytas Infra. He told CID sleuths that this was going on since 2004.
Raju not only diverted funds out of Satyam but is also believed to have misled company auditors PricewaterhouseCoopers (PwC) by submitting fake bank documents. CID and some regulatory agencies have already seized some documents from PwC.
Raju also reportedly swindled money through 6,000 fake salary accounts for last few years. Sources said he had created these accounts in four banks to divert the funds from fixed deposits. Some of these funds were flowed through his accounts in foreign banks.
The company's claims that it had 53,000 employees came under scrutiny after Raju's January 7 confession. The government-appointed board is also trying to ascertain these figures.
With Raju confessing to diversion of funds, the Serious Fraud Investigation Office (SFIO) and Registrar of Companies (RoC) are now trying to trace a Mauritius-based company used for channelising the money to Maytas. ( Watch )
The central government has already asked SFIO to extend the ambit of investigations of Satyam fraud to cover both Maytas Properties and Maytas Infra. A team of SFIO is checking the accounts and records of the two firms.
However, both the firms have denied that they received any funds from Satyam.
Wednesday, January 21, 2009
has shown interest in taking management control of the company, Essar's BPO arm, Aegis, is reportedly keen on acquiring Satyam's BPO business.
The news triggered a rally in Satyam's shares which rose by 5.5% to Rs 26.85 on a day when sensex fell by 2.45%.
L&T CMD A M Naik on Tuesday discussed the Satyam issue with corporate affairs minister P C Gupta. Naik said he was worried about protecting L&T's interest in the company, which currently stands at 4%. Though the stake was acquired as a portfolio investment, Naik, responding to questions, didn't deny that L&T was keen to acquire the company. It's believed that the acquisition bid would be made through L&T's software arm.
Though P C Gupta is believed to have told Naik that Satyam's board would decide the matter, it's learned that the government isn't keen on either L&T or Essar buying Satyam at the moment. Instead, it wants the company to consolidate its finances before allowing any acquisition to take place.
Tarun Das, a government nominee on the Satyam board, said that a number of foreign and domestic companies had expressed interest in acquiring the scam-tainted company. The company's board had not taken any view on the issue so far.
Another board member, Deepak Parekh, had earlier said that the option of merger and acquisition was always open for the company. It is learned that the board is likely to soon appoint a merchant banker to zero in on a suitor. Earlier, B Ramalinga Raju's board in late December had appointed DSP Merrill Lynch to find a strategic investor in the company. But later, Raju's sensational disclosure that he had fudged company accounts ended the company's relationship with DSP Merrill Lynch.
Meanwhile, Essar's Aegis has also submitted an expression of interest in buying out Satyam's 3,500-seat BPO business. CEO of Aegis, Apporva Sengupta, confirmed that he had submitted an EOI for the business but refused to disclose the amount he would be willing to pay. He said he would study details of the company's revenue and verticals before putting a price tag on it.
According to Satyam's second quarter result, its BPO's revenue for the quarter ending September 2008 was at Rs 55.6 crore, down 8.65% compared with the corresponding period of the previous year. Its BPO business has not broken even so far. In the second quarter, BPO business had made a loss of Rs 20.05 crore.
The acquisition of Satyam's BPO business will accelerate the expansion of Aegis's internet enabled businesses. Aegis currently has 32,000 employees and has recently acquired the Philippines-based PeopleSupport Inc for $ 250 million.
An IT expert said Aegis and Satyam's BPO arm are likely to have good synergy. Satyam BPO operates from Hyderabad, Bangalore, Chennai and some on-site centres. It has clients such as BellSouth and Verizon in telecom, Caterpillar in construction and GlaxoSmithKline in health care.
It is learned that the issue of roping in a strategic partner has acquired urgency as the company found that most of its receivables for next couple of months are already mortgaged to ICICI Bank. Therefore, the company needs immediate cash to continue operations. An acquisition would help the company tide over the crisis and protect shareholders' interest.
company's board member Tarun Das said.
The board will meet for two days starting January 22 in Hyderabad and would discuss issues such as search for CEO and CFO, legal matters and immediate cash requirements to run the company, he told reporters.
The board would also discuss whether it needs to ask the government to stand as a guarantor for raising loans.
Das said the company has been approached for buyouts by both international and Indian IT firms. There have been unconfirmed reports that the company might soon appoint investment bankers to advise on a merger or sale.
Earlier, another board member Deepak Parekh had said that option of merger was always open for the company.
The board meeting would deliberate on class action lawsuits filed against the company in the US.
The six-member board, appointed by the government to run the firm after a shocking Rs 7,800 crore fraud disclosure by founder Ramalinga Raju on January 7, last met on January 17.
According to Finance Ministry sources, Satyam does not have deposits of more than Rs 150 crore with banks. These deposits could include both fixed deposits and current accounts and these deposits are distributed among PSU banks, private sector banks and foreign banks.
PSU banks, Finance Ministry sources tell us, have an exposure of Rs 2000 crore to all Satyam subsidiaries, associates and joint ventures. However, they say that this exposure is secure and the security is worth Rs 2,800 crore against this exposure.
These securities are in the form of receivables, property and shares. Also, Finance Ministry sources reported that PSU banks have zero exposure to Satyam.
Therefore, it can be concluded that Satyam continues to have deposits of Rs 150 crore with banks in India.
Its net sales are expected to go up 37% at Rs 1,688 crore versus Rs 1,226.8 crore. OPM is seen going up by 80 bps at 9.7% versus 8.9%.
Factors to watch
Pantaloon continues retail roll out at brisk pace – total retail space now upwards of 12m sq. ft.
Standalone retail space up 33.5% YoY to 8.6mnsqft
3 Big Bazaars (including cut-in Food Bazaars) and 1 Pantaloons department store were opened in Q3
Sales growth to be driven by these new store openings and the discount sales during the quarter
Efforts to manage operating costs, especially renegotiation of peak rentals and easing cost pressures will mean an expansion in margins
PAT growth lower – To be impacted by steep increase in interest cost and depreciation
Need to watch out for: Sales and same store sales growth in December, and increase in inventory during the quarter
Tuesday, January 20, 2009
The newspaper said the Serious Frauds Investigation Office believes Satyam's headcount could have been inflated by 15-20 percent to siphon off money as salary payments to non-existent employees.
"Since a major chunk of the costs were actually salaries, a minor distortion in the number of employees could change the personnel expenses significantly," the paper quoted the source as saying.
Asked to comment on the report, a Satyam spokeswoman told Reuters: "We believe the numbers are accurate at this point of time."
The Economic Times also said engineering and construction firm Larsen & Toubro had appointed Japan's Nomura to advise it on a possible deal with Satyam, in which it already has a stake of about 4 percent.
A spokesman for Larsen said the company does not comment on market speculation.
The newspaper also said unlisted Aegis, part of India's Essar Group, was interested in buying Satyam's business process outsourcing (BPO) business.
"As a group, we constantly look at opportunities in sectors where we are. We would not like to comment on specific proposals," an Essar spokesman said.
Manpower expenses constitute more than 60 percent of total costs at Satyam, and investigators say the ratio of manpower cost to revenue has remained constant over the past three years despite an increase in the number of employees, the Economic Times said.
The company's website says it had close to 53,000 staff, including those in subsidiaries and joint ventures as at end-September, and it has since said that around 2,000 staff have left.
Satyam, India's No.4 software services exporter, was plunged into crisis after founder Ramalinga Raju resigned as chairman earlier this month, revealing profits had been falsified for years and $1 billion of cash on the books did not exist.
"I am concerned about my stake in Satyam," L&T Chairman A M Naik said after meeting Corporate Affairs Ministry officials.
The meeting of Naik with the MCA official comes amid reports that the company is in the race to buyout Satyam and that it has appointed Japanese financial services firm Nomura to advise on a possible deal with Satyam.
The engineering major currently holds about four per cent stake in Satyam, to run which the government has appointed a new six-member board. One of the board members, S Balakrishna Mainak, is from LIC - another Satyam shareholder.
On January 7, Satyam founder Chairman B Ramalinga Raju had disclosed a Rs 7,800-crore fraud in the company's accounts. Following this, Satyam's scrip had plunged nearly 80 per cent on a single day. Multiple probes are on to unravel the fraud.
Only yesterday, the government expanded the scope of a 'serious fraud' probe to cover two other Raju family-promoted companies -- Maytas Properties and Maytas Infrastructure.
Besides, the Registrar of Companies (RoC) in its report has said that the ex-promoters and top officials of the Hyderabad-based IT firm may have indulged in insider trading.
decline of 4.7% in dollar-denominated revenue on a standalone basis. On a consolidated
basis, it registered a growth rate of 3.6% in dollar revenue, thanks to its Aztecsoft acquisition. The India growth story is clearly visible in case of Mindtree. The dollar revenue from India grew at around 28% quarter-on-quarter, far higher than any other geography.
The dollar revenue from US, from where the company gets around 60% of its revenue and also independent of cross-currency impact declined by 4% on a standalone basis. But the good growth contribution from Aztecsost pushed consolidated dollar revenue from US up by 7.8% (Q-o-Q). Another interesting trend visible was the sharp decline of around 28% in dollar revenue from Asia Pacific Region which can’t be justified by currency depreciation alone. Contrary to the many IT companies, Mindtree reported a superb growth rate of around 34% (Q-o-Q) from automotive and industrial system industry.
However, to offset the impact of lower revenue growth, like many other IT companies, it reduced its operational expenses drastically. The personnel cost and travel expenses declined by 18.3% and 14.5% respectively compared to the preceding quarter. This resulted in around 300 basis points expansion in consolidated operating margin.
But the real mayhem came in terms of foreign exchange loss which wiped out almost all of the operating profit. Mindtree alone suffered a foreign exchange loss of Rs66.6 crore. More than two-third of this is in the form of mark-to-market losses. Considering the huge exchange losses in last three quarters, the company has decided to change its hedging policy. Going forward, the company will hedge only those contract revenues which are classified as hedge under accounting rules and second, it will only hedge for 12 months of revenue in contrast to 48 months seen in March, 2008.
As a result of such huge foreign exchange loss, the net profit became less than one-fourth of what it was in the Sep ’08 quarter.
Monday, January 19, 2009
· Bajaj Auto reported Q3’09 results, total revenue went down
16% yoy to Rs. 21.03 bn, and net profit declined 23% yoy to
Rs. 1.64 bn. (ET)
· Jindal Steel & Power’s subsidiary Jindal Petroleum has
signed four production sharing contracts with the government
of the Democratic Republic of Georgia for exploration and
production of four blocks of oil and gas and will invest
USD 150 mn in phases in these blocks. (ET)
· Gail India may get exclusive marketing rights for the
distribution of the natural gas produced by Reliance
Industries from its D-6 block in the Krishna-Godavari basin.
· L&T is in an advanced stage of talks with Nuclear Power
Corporation of India for setting up a joint venture company for
producing forging materials. (ET)
· HPCL has signed an agreement with the Bihar government to
buy two sick sugar mills, in a move that will revive and
expand the agro-based industries in the state. (ET)
· MMTC will not be investing in a special purpose vehicle
created by Maytas group for setting up a SEZ. (ET)
Economic and Political Headlines:
· Prime Minister Manmohan Singh said that India's woes due to
the global meltdown will continue during the next fiscal, and
predicted a lower growth of 6.5-7% for the country's economy
this year. (ET)
· The government will stick to its borrowing schedule to raise
Rs. 500 bn instead of Rs. 350 bn. (ET)
International News Headlines:
· The US President-elect Barack Obama is likely to back a
financial-rescue effort to provide capital to banks and deal
with troubled assets clogging balance sheets. (Bloomberg)
· According to Federal Reserve, the consumer prices and
industrial production tumbled in the US with the cost of living
falling 0.7%, Industrial output shrinking 2%, and the capacityutilization
rate sliding to 73.6% in December 2008.
to Rs. 57.86 bn, and net profit increased 33.3% yoy to
Rs. 16.41 bn. (BS)
· SBI entered into an agreement with the Gujarat government
to create a Rs. 50 bn fund for investing in equity of
infrastructure projects. (ET)
· BPCL was negotiating with Reliance Industries for allocation
of gas from the Krishna-Godavari basin, off the Andhra
Pradesh coast. (ET)
· Gujarat NRE Coke is planning to invest about Rs. 30 bn over
the next 4-5 years in expansion projects across Gujarat. (ET)
· GAIL India is planning to invest Rs. 50 bn over the next 3-4
years to set up a CNG corridor across the country. (BS)
· IDFC signed two MoUs with Gujarat State Energy Company
and BHEL to establish a 1600 MW thermal power plant at
Sarkhadi based on supercritical technology. (BS)
· ONGC is planning to invest USD 5.3 bn in developing gas
finds in two of its eastern offshore Krishna Godavari basin
blocks by 2013. (BS)
· Hindustan Construction signed two agreements with the
Gujarat government with total investment of Rs. 415 bn. (BS)
· NTPC is planning to invest Rs. 60 bn in super thermal power
projects in MP, UP, and Chattisgarh. (BS)
The objective of the game is to "hit Ramalinga Raju in the face with rotten eggs."and win an iPod!
Within days of its launch, the game has already been played more than 100,000 times, with a few playing it over and over again, as per the information on the website of the game.
In the game, available on the website, NailTheThief.Com, a player is given a chance to hit Raju's face with rotten eggs as many times possible within 30 seconds.
As the multi-pronged probe against the Raju brothers — and others who were possibly guilty — continues, the Serious Fraud Investigation Office (SFIO), which is spearheading the investigation against Satyam, has been asked to probe books of the two Maytas companies. “There seems to be a nexus between Satyam, Maytas Properties and Maytas Infra,” PC Gupta, Minister of Corporate Affairs, said.
In an abortive deal, Satyam had earlier attempted to buy out the two companies. The overnight move, however, met with investor outrage and prompted the board to go back on its decision. Ramalinga Raju later in his confession letter admitted that the move was aimed at getting real assets on the company’s balance sheet in lieu of inflated ones.
A report by the Registrar of Companies (RoC) has said that falsification of books and over statement of Satyam’s financial position is to the tune of Rs 5,000-6,000 crore.
• Bajaj Auto reported Q3’09 results, total revenue went down 16% yoy to Rs. 21.03 bn, and net profit declined 23% yoy to Rs. 1.64 bn. (ET)
• Jindal Steel & Power’s subsidiary Jindal Petroleum has signed four production sharing contracts with the government of the Democratic Republic of Georgia for exploration and production of four blocks of oil and gas and will invest USD 150 mn in phases in these blocks. (ET)
• Gail India may get exclusive marketing rights for the distribution of the natural gas produced by Reliance Industries from its D-6 block in the Krishna-Godavari basin. (ET)
Economic and Political Headline
• Prime Minister Manmohan Singh said that India´s woes due to the global meltdown will continue during the next fiscal, and predicted a lower growth of 6.5-7% for the country´s economy this year. (ET)
• The US President-elect Barack Obama is likely to back a financial-rescue effort to provide capital to banks and deal with troubled assets clogging balance sheets. (Bloomberg)
• According to Federal Reserve, the consumer prices and industrial production tumbled in the US with the cost of living falling 0.7%, Industrial output shrinking 2%, and the capacity-utilization rate sliding to 73.6% in December 2008. (Bloomberg)
Saturday, January 17, 2009
Consumer prices and industrial production tumbled in the U.S. as a record slide in retail sales destroyed companies’ pricing power and idled more than a quarter of factory capacity.
The cost of living fell 0.7 percent in December, capping the smallest annual increase since 1954, the Labor Department said today in Washington. Industrial output shrank 2 percent, and the capacity-utilization rate slid to 73.6 percent, the Federal Reserve said. A private survey showed consumer sentiment little changed in January.
The figures indicate a deepening threat to earnings at businesses from manufacturers to retailers. A survey of chief executive officers today showed the lowest level of confidence in at least three decades. Further declines in prices would raise the danger of deflation, which would deepen the recession by making debts harder to pay off.
“Companies in many different areas are cutting prices in order to try to preserve business,” said Nigel Gault, chief U.S. economist at IHS Global Insight in Lexington, Massachusetts. “We don’t have evidence yet that the rate of decline” in the economy is slowing, he said.
Treasuries, which fell earlier today on concern about the rising cost of government bailouts of financial companies, remained lower after the reports. Yields on benchmark 10-year notes rose to 2.32 percent at 2:51 p.m. in New York, from 2.20 percent late yesterday. The Standard & Poor’s 500 Stock Index rose 0.2 0.6 percent to 845.69.
Consumer prices were forecast to fall 0.9 percent, according to the median estimate of 80 economists in a Bloomberg News survey. Projections ranged from declines of 0.4 percent to 1.5 percent.
For all of 2008, prices rose 0.1 percent after increasing 4.1 percent the previous year.
Terry Lundgren, chief executive officer of Macy’s Inc., the U.S.’s second-largest department store, said he expects the company “will continue to be promotional for a very long time” after Macy’s cut prices as much as 75 percent in a sale on Jan. 10.
Alcoa Inc., the world’s largest aluminum maker, last week reported a third major production cut in as many months and said it will reduce its global workforce by 13,500 after demand for the metal used in automobiles and appliances plunged.
Consumer prices excluding food and energy were unchanged in December for a second month and up 1.8 percent last year, the smallest annual increase since 2003. Over the last three months, the rate is falling at an annual rate of 0.3 percent.
Fed Bank of San Francisco President Janet Yellen warned yesterday it’s “not acceptable” for policy makers to allow inflation to fall “to levels that are unhealthy.”
Energy costs dropped 8.3 percent last month and were down 21 percent for the year, the biggest decline since those records began in 1958. Gasolineprices decreased 43 percent in 2008, also the biggest decline on record going back to 1937.
Food prices, which account for about a fifth of the CPI, decreased 0.1 percent, led by a 2.4 percent drop in the cost of fruits and vegetables.
Prices for clothing, new automobiles, airline fares and recreation all decreased last month. For all of 2008, the 3.2 percent drop in new-car prices was the biggest since 1971.
The Fed’s production report showed factory output alone decreased 2.3 percent, led by a 7.2 percent decline in autos and parts. Automakers assembled cars and light trucks at an annual rate of 6.43 million during the month, the fewest since 1982.
The Reuters/University of Michigan preliminary index of consumer sentiment rose to 61.9 from 60.1 in December.
“The current level of consumer confidence already indicates a deep and long recession is expected by consumers,” Richard Curtin, director of the survey, said in a statement.
President George W. Bush’s top advisers cut their forecasts for growth in the economy and painted a bleak unemployment picture in a report released today. The economy will expand 0.6 percent this year and 5 percent in 2010, Edward Lazear, the White House chief economist, said in the president’s annual economic report. The unemployment rate will average 7.7 percent in 2009 and inflation is projected to average 1.7 percent.
Business leaders are also glum. Confidence among chief executive officers dropped in the fourth quarter to the lowest level in at least three decades of record keeping, according to a report today from the Conference Board, a New York-based research group. Only 11 percent of those polled said economic conditions are likely to improve in the next six months.
Retail sales fell 2.7 percent in December, the sixth consecutive drop and extending the longest string of declines on record, the government said Jan. 14.
“Overall inflation has already declined significantly and appears likely to moderate further,” Fed Chairman Ben S. Bernanke said in a Jan. 13 speech in London. “At this point, with global economic activity weak and commodity prices at low levels, we see little risk of inflation in the near term.”
President-elect Barack Obama is seeking to halt the economy’s decline with a stimulus plan that includes tax cuts, aid to states to sustain government healthcare programs and spending on roads, schools and the energy network. House lawmakers this week began work on an $825 billion package.
The situation has reached alarming proportions in the last 72 hours with at least six customers indicating they would like to terminate contracts. They are asking for transition plans even as the cash-strapped company has stopped all payments to vendors, sub-contractors on customer sites and travel services, senior company sources told DNA.
Moreover, in the absence of a CEO, no decisions are being taken while the company needs $50-60 million by the end of next week and a total of $100 million by the end of the month to pay salaries, rentals, and other expenses, they added.
Sending out an SOS of sorts, the senior leadership has said that the new board will have to communicate more aggressively with customers to hold them back. While new board member Kiran Karnik has been talking to three or four customers every day, what is being suggested is a webcast or broadcast by the entire board to customers to get the message across that they are serious about rescuing the company.
At last count, around the end of September Satyam had 649 active customers, of whom 185 were Fortune 500 companies. Currently, some 3,500-3,800 projects are going on, and some of them are slated for completion within the next six months.
At the end of Q2, Satyam had a total of 48,434 onsite, offshore and domestic employees. Considering the loading, or utilisation rate of 76% of employees, at any given time there are close to 10,000 employees without any work. In fact, it is these employees who have flooded job portals with resumes, the senior executive said.
However, with customers beginning to leave and with no prospects of any new business over the next six months, it is imperative that Satyam starts retrenching employees soon, he said. While it will be the employees on the bench who will go first, the number of pink slips will swell if the current situation persists, he added. In fact, the company is not likely to be even short-listed for new bids.
Some of the customers, who have asked for transition plans from Satyam, have also sought "rebadging" of associates on their projects so that the handover to new vendors can be smooth, the sources said. Rebadging means using current employees to handle the projects in new vendor companies or even absorption into the main client company.
Significantly,auditors KPMG and Deloitte will also conduct an employee audit, the senior source said. This gains significance in the backdrop of doubts being expressed over Satyam's exact employee strength.
Ramalinga Raju is suspectedto have jacked up the numbers to hike the salary bills. However, the senior management discounted such a possibility.
State-run Indian banks have lent 33 billion rupees ($676 million) to Maytas Companies, which have interests in property and are controlled by the family of fraud-hit Satyam Computer Services , the Times of India reported on Saturday.
Citing an unnamed finance ministry official, the paper said most of the funds have already been given to the firms via loans and bank guarantees.
Maytas -- Satyam spelt backwards -- companies include Maytas Properties and Maytas Infra.
Maytas Infra shares have tumbled around 75 percent since Dec. 16, when Satyam announced plans to buy it and Maytas Properties for $1.6 billion cash before abandoning the plan under shareholder pressure.
Satyam, India's No. 4 software services exporter, has been battling for survival since chairman Ramalinga Raju suddenly resigned last week, revealing profits had been falsified for years and that $1 billion of cash on the books did not exist.
Separately, the Economic Times reported the government has assured state-run banks that it will allow them to take over pledged properties and invoke guarantees if these firms failed to service loans, citing an unnamed finance ministry official.
"The loans are fully secured and the banks are in posession of securities worth 27 billion rupees," the official told the financial daily.
Satyam's shares ended up 20.4 percent at 24.45 rupees on Friday, but the stock is still down more than 85 percent since the massive fraud was revealed. ($1=48.8 rupees)
Wednesday, January 14, 2009
The SEBI lawyer says this will delay a probe into the truth behind the Satyam episode.
"For each and every document, we have to make an application to the court and take the permission of the court, then go through the papers. Naturally there will be delay investigation," says SEBI lawyer, Pradyumna Kumar Reddy.
SEBI says it is the best equipped to handle a financial accounting fraud involving a listed company.
"SEBI should be given all information first and SEBI should be allowed to probe," says Reddy.
And one of the key areas SEBI will go into is - Did the top management indulge in insider trading? Did they sell shares in bulk?
Ramalinga Raju sold over 14 per cent Satyam shares in the last eight years, bringing his holding down from 22.89 per cent to 8.27 per cent in September 2008.
And Raju was not alone. Network 18 has learnt that as many as 20 people from the Satyam senior management sold shares just before the Maytas deal happened in December 2008.
Among them were Satyam CFO Sriniwas Vadalamani and Board Director Ram Mynampati - who is now the interim CEO of the company.
According to sources, among the top management of the company:
*Srinivas Vadlamani sold 92,538 shares
*Ram Mynampati sold 7 lakh shares and 2.5 lakh American Depository Receipts (ADRs)
*Keshan Mehta 6.1 lakh shares and 1 lakh ADRs
*Pavan Kumar Maddali sold 5.2 lakh shares and 75,000 ADRs
*Manish Mehta sold 30,000 shares
*T Hari sold 13,000 shares
*Independent Director Vinod Dham sold 2,500 shares
Apart from the top management, some 16 senior vice-presidents also sold shares in considerable amounts, raising questions of corporate governance and insider trading. It makes it seem as if everyone in the top echlons of the company had an idea that India's biggest corporate fraud was round the corner.
Saturday, January 10, 2009
Dr Babasaheb Ambedkar Jayanti
Parsi New Year
Mahatma Gandhi Jayanti
Guru Nanak Jayanti
Friday, January 9, 2009
They are, essentially, saying in their statement that they have conducted the audit as per relevant accounting standards. They have conducted the audit with ample evidence which one needs in an auditing assignment. Also, they are saying that they will not make a formal comment on the alleged irregularities that have surfaced in the media and other places over the last two-days.
However, what they have said is that they will corporate with the regulators and other law enforcement agencies as and when it is required. But having said that, we have also been speaking throughout the day to officials in the Ministry Corporate Affairs, and I can tell you that there seem to be finalizing a host of serious charges against the auditors because of a fraud of this kind cannot be conducted without the negligence of the auditors. What we do understand is that the Minister of Corporate Affairs, Premchand Gupta, has asked for the financial reports review board to actually come forward with an internal auditing papers of Pricewaterhouse as they conducted the audit in Satyam and should report back to the Ministry in three days after which, perhaps, the ICAI accounting regulator will take over, identify the loopholes, identify where the negligence has been, and possibly, frame formal charges on the auditors.
The Exchange has decided to make the following replacements in BSE indices w.e.f January 12, 2009
Castrol India Ltd.
Cadila Healthcare Ltd.
Additionally, Satyam Computers will also be excluded from BSE-TECk and BSE IT index.