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Tag Archives: Satyam

Is IT Sector Killing Itself and The Young Minds By Keeping Them “On Bench”

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Figure out a few of the headlines in recent times,

“18,000 People On The Bench At Infosys”
“Mahindra Satyam places 500 associates on bench”

Not that this practice is something new, but it has never ceased to riddle me. Moreover, in the current economic downturn, with companies battling it out to maintain their profitability, these headlines sure signal a cause of worry.

I had wanted to write on it for quite sometime, but it was not until that I read this piece by Sramana Mitra who is asking what these 18,000 people are doing (Infosys Headline).

Not sure if I can answer this, since I was lucky enough to be un-benched quite early after joining the job. But, I have had my experiences and the ones I gathered from people around me. And believe me, they are anything but nice.

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Satyam letter from Mr. Ramalinga Raju to its board directors admitting fraud !

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To the Board of Directors Satyam Computer Services Ltd. Dear Board Members, It is with deep regret, at tremendous burden that I am carrying on my conscience, that I would like to bring the following facts to your notice: The Balance Sheet carries as of September 30, 2008 Inflated (non-existent) cash and bank balances of Rs.5,040 crore (as against Rs. 5361 crore reflected in the books) An accrued interest of Rs. 376 crore which is non-existent An understated liability of Rs. 1,230 crore on account of funds arranged by me An over stated debtors position of Rs. 490 crore (as against Rs. 2651 [cr.] reflected in the books) For the September quarter (02) we reported a revenue of Rs.2,700 crore and an operating margin of Rs. 649 crore (24% Of revenues) as against the actual revenues of Rs. 2,112 crore and an actual operating margin of Rs. 61 Crore ( 3% of revenues). This has resulted in artificial, cash and bank balances going up by Rs. 588 crore in Q2 alone. The gap in the Balance Sheet has arisen purely on account of inflated profits over a period of last several years (limited only to Satyam standalone, books of subsidiaries reflecting true performance). What started as a marginal gap between actual operating profit and the one reflected in the books of accounts continued to grow over the years. It has attained unmanageable proportions as the size of company operations grew significantly (annualized revenue run rate of Rs. 11,276 crore in the September quarter, 2008 and official reserves of Rs. 8,392 crore). The differential in the real profits and the one reflected in the books was further accentuated by the fact that the company had to carry additional resources and assets to justify higher level of operations — thereby significantly increasing the costs. Every attempt made to eliminate the gap failed. As the promoters held a small percentage of equity, the concern was that poor performance would result in a take-over; thereby exposing the gap. It was like riding a tiger, not knowing how to get off without being eaten. The aborted Maytas acquisition deal was the last attempt to fill the fictitious assets with real ones. Maytas’ investors were convinced that this is a good divestment opportunity and a strategic fit. Once Satyam’s problem was solved, it was hoped that Maytas’ payments can be delayed. But that was not to be. What followed in the last several days is common knowledge. I would like the Board to know: 1. That neither myself, nor the Managing Director (including our spouses) sold any shares in the last eight years — excepting for a small proportion declared and sold for philanthropic purposes.

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