Raju ban gaya un-gentleman

What happened yesterday - the shocking confession and the carnage at the bourses - is of common knowledge today. The 7000 crore rupees scam might as well go down as one of the biggest scams in the Indian corporate history. The scam, that left over 2.75 lakh odd share holders of Satyam aghast and siphoned off over 8000 crores of their savings in less than a day’s trade, has taken the world by surprise – more so because it involved India’s 4th largest IT service provider [whose name is a Sanskrit word meaning ‘Truth’]. The man on the street today asks only one question – Mr. Raju, why on earth did you do this to us?

This scam certainly brings forth the ‘Paper Corporate Governance’ that exists in India. Paper, because India is an over-regulated-under-executed land of laws. When Satyam announced a $1.6bn deal to acquire Maytas, it was not because of any measures taken under the corporate governance that forestalled the deal, but it was because of the harsh investor reaction that followed. Still one wonders - are the corporates free to do ‘anything’? Well, SEBI [Securities & Exchange Board of India] mandates all the listed companies to disclose their earnings quarterly and these financial disclosures are the means by which any investor makes an informed decision of investing in the company, or otherwise. But when it is learnt that the very source of information you base your decisions on, is fraudulent, sentiments are hurt and confidence is lost – not only on the company, but also on the auditors who ratify the books. No wonder PWC is in the firing line today.

However the grey area remains - what can the auditor do if the books have been cooked up over a long period of time. CFOs worldwide agree that at some point or the other in their careers, they have been influenced by the CEOs or the market conditions to cook-up the figures. With Raju, I think he just forgot to follow the 11th Commandment – Never Get Caught!!

Ever since the ex-chairman got 'caught', news channels are flooded with comments from corporate world, lawyers, advocates, auditors and who’s who of the financial markets world over. Some called it a scar on the face of India Inc., while some called it as the beginning of the end of the sun-shine sector [read IT industry]. Some were worried about the fate of 53000+ employees of Satyam, while some even doubted that number. Some started speculating how soon Satyam’s share price will hit that magical figure of Rs 0/- while some saw it as a time to do some bottom-fishing. Only a few, including the interim CEO Ram Mynampatti, held on to a contrarian view and were hopeful of a miraculous turnaround of events. They hoped for some Divine intervention in the form of an IT major agreeing to dirty its hand, and saving Satyam from facing the gallows. Yet, there was a consensus that Satyam as a brand has lost its sheen and is certain to weep blood in times to come. The cash-flows are abysmally low, and if rumors are anything to go by, Satyam might not be having enough cash to even disburse next month’s payrolls.

Investor community – where many are still in a state of shock and yet to come to terms with what has happened; and those who have managed to regain senses are still crying over the spilled milk – demands strong action. Raju in his letter [read suicide node] might have taken the sole responsibility of the fiasco, and might have placed his board members inside an iron fence, but that doesn’t affect the sagacity of those hurt by the incident. Sentiments are strong in favor of forming a committee, probably under the leadership of N.R. Narayanmurthy & Azmin Premji, which will help Corporate India come back ever strongly, and prevent such frauds in future.

As of today, the picture is murky - there are doubts about whether anyone else knew of such a thing happening in the company; whether the auditors were kept in dark all the while; and whether the Mayatas deal had more to it than is known to us today. As the days will pass, the dots will be connected, and a clearer picture will arise. However, one thought that bothers me, and a lot of other investors is - if riding the tiger and getting off it was so tough, why even chose it as a ride?