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What do you get for 100 rupees? 2 shares of Satyam and a Pepsi MyCan

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I could not resist that. I apologize. I also apologize for the Satyam overdose. But, you know none of my feeds are showing anything exciting.

For 100 rupees you can get 2 shares of Satyam and a pepsi Mycan and possibly some change back. You don’t have to fight for the mycan like Ranbir Kapoor does the latest ad.

A lot of questions are coming to my mind. Looks like there are more questions than they are answers. How exactly is this a 7000 crore scam? Our first and best source right now is the letter.

5040 crores of non-existent cash
376 crores of non-existent interest accrued
1230 crores of liability which was arranged by Raju personally
490 crores of overstated debtors position

That totals to 7136 crores. Since Raju has arranged those funds personally and they never go into the books let us leave it there. Take the 1230 crores out of the scam. That would leave us with 5906 crores.

If going by the earlier valuations Satyam was a $2bn company. Taking a 47 rupees per dollar that would be 9400 crores. That would mean the company’s value is 3494 crores? Which again is $740 million?  This also means that the company is still solvent.

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Satyam has 53000 employees and 185 of the Fortune 500 companies are its clients. The company is now valued at ~$700 millioin. That is so damn cheap. Why isn’t anyone buying it?

Even the valuation is around $700 million there are bunch of reasons why no one is coming forward.

  1. Satyam is set to lose half of its clients following the scandal.
  2. Many of the 53000 employees are already looking for greener pastures. Rumor is that 15000 resume’s have flown out of Satyam just yesterday.
  3. There is a catch-22 situation here. The valuation of $2bn was when Satyam had 5000 crore of cash. Now that the cash is not there would the earlier valuation be $2bn?
  4. Many believe that there is a deeper mess.
  5. Whoever buys Satyam right now will spend most of their time in courts. There is a pending case against Satyam by Upaid. Following this revelations by Raju more will follow.

The only saving grace could be that no top management is involved other than Raju. This is highly unbelievable but that is what we have right now.

If we wait a little while you might actually get 4 shares of Satyam and 2 Pepsi Mycans.

PS : Please don’t seize my blogging license if I have commited a accounting fraud in this post.

  1. Anand says

    Its time for us to stop satyam talk ! May be pass a resolution for new year :-)

    And guess what we can wait for one more breaking news of same magnitude and we all be good.

  2. Ravi Kannan says

    Very good post. Anyone trying to buy Satyam will also have to deal with all the class action lawsuits that will be filed in the US as they are listed there as well. Majority of the money and energy will go towards taking care of those expenses. In all this the lawyers will make merry. Though some of it will be insured and the insurance companies will pay for the expenses and settlement, but in this case where a fraud has been proved (personally confessed) don’t know how it will pan with the insurance companies.

    Regarding top management, not being involved, I would think most people in the senior management would not be privy to such information. But I am sure along with Ramalinga Raju, the MD (who is his own brother) and CFO would definitely know. You cannot rule out the involvement of PWC in this. PWC would be kidding if they say they did not know anything about it. I am sure in the coming days we will know.

    Ravi Kannan
    http://www.jobsbyref.com

  3. Yash says

    Your calculations are bang on “almost”. From Raju’s letter it looks like in reality Satyam has only 300 odd crores of cash, which will hardly pay one month’s salaries for its 53000 employees (I am assuming an average salary figure of Rs. 50000 X 53000 = 265 crores or round about). Raju has also mentioned that he had to do all this jugglery in order to pay salaries on time – Raju had to pledge his own shares to pay the salaries, which means the company is already bankrupt! And when you earn a profit of only Rs 61 crores on a turnover of 2100 crores, something is not correct with the way you handle your finances. Satyam is doomed. Clients will move on to other vendors and majority of the employees will also abandon the ship. The only option available for Satyam is a consortium of investors or a corporate raider buying its material assets like real estate and all and liquifying the company .

  4. Arun Prabhudesai says

    Hey Sriram,

    I think 700 million is a good price….even with the scandal, I think other Indian IT services companies must be salivating on it…especially the multinationals.

  5. Ramesh Srivats says

    Well, the chairman could use defence 2.0 :-)
    http://www.rameshsrivats.net/2009/01/satyam-chairman-on-trial.html

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