Satyam: Full text of Raju’s letter to the Board-1

To the Board of Directors Satyam’s board members

 

Satyam Computers Services Ltd.

 

From B. Ramalinga Raju

Chairman, Satyam Computer Servcies Ltd

 

Dear Board Members,

 

It is with deep regret, and tremendous burden that I am carrying on my conscience, that I would like to bring the following facts to your notice:

 

1. The balance sheet carries as of September 30, 2008

 

a) Inflated (non-existent) cash and bank balance of Rs 5,040 crore (as against Rs 5361 crore refglected in the books)

 

b) An accured interest of Rs 376 crore which is non-existent

 

c) An understated liability of Rs 1,230 crore on account of funds arranged by me

 

d) An over stated debtor position of Rs 490 crore (as against Rs 2651 reflected in the books)

 

2. For the September quarter (Q2) we reported a revenue of Rs 2,700 crore and an operating margin of Rs 649 crore (24 per cent of revenues) as against the actual revenues of Rs 2,112 crore and an actual operating margin of Rs 61 crore (3 per cent of revenue). 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 the 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 the poor performance would result in a takeover, 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.

 

More in next post…..

 

ref: The Economic Times

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2 responses to “Satyam: Full text of Raju’s letter to the Board-1

  1. Nice Article.

    Like

  2. Nothing seems to be easier than seeing someone whom you can help but not helping.
    I suggest we start giving it a try. Give love to the ones that need it.
    God will appreciate it.

    Like

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