More satyam

Probably the most easy-to-go-down version of how to explain all the shit thats been dug up, and now flying around Satyam . Here

This explanation is valid, of course - assuming, that Raju (in his sensational letter, that is) was more or less truthful, atleast in a macro sort of way.

But - I doubt if all the worms are out of the can yet - because (i guess) you cant fabricate holes - which are 5000 / 7000 crores in size - on a company doing annual revenues of only that scale. (eg. Fabricate 600 crores over just 2000 crores of actual revenues.Thats like making one fake invoice for every 3 real invoices uve made or something. WOW)

The whole thing STINKS of something more.

Pricewaterhousecooper auditors maybe negligent or even corrupt - but surely not total jokers who want to spend the rest of their lives in prison or something.

Remember Arthur Anderson ? who went down with Enron..when the big 5 became what is today, Big 4 [ PWHC are one of the big 4, incidentally]

But hey, this sort of thing goes on, in manageable levels across every company one'll come across anywhere in the world - again, i can only guess.

When Narayanamurty was asked by Shereen bhan if he will like to take satyam over, he wrinkled up his nose and said "I can categorically state that a firm of Infosys' stature wont TOUCH the assets or get involved in the affairs of a 'tainted' company like that".

I personally dont know a single person who wont/hasnt cut a corner or two to get ahead in life - maybe Mr. Murthy is one such person, eh ? You get painted when you get caught and all that, but thats something else, isnt it?

I refuse to believe that Infy does / has done all of its 5 billion dollar or so business a year without a little bit of this or that - Maybe, they scrupulously account for each penny they payout for this and that or maybe they pay baksheesh out officially as cheques.

Hmm, i scroll up and one or two green, highly opinionated readers might think that i am this total unethical SOB (in addition my borderline antisocial tendencies ;-) - but heck, this is what i think and the one thing i always will be is pragmatic. Naah! too cheap

** The End **

[Disclaimer: Do not go beyond this point if you plan to ever come back again to my blog because the below rant is long, boring and mostly useless bull]

Sidetrack:

Remember the part in the letter where Raju states that the whole thing started when he suddenly ran out of money to pump in to feed satyam's struggling growth engine -

How ?

Earlier he had pledged his shares and raised cash - (Like the old fashioned Kumbakonam Marwadi Pawn shop) typically the amount of cash borrowed would have been LESSER than the actual value of his collateral (in this case, ONCE valuable satyam shares) But with the Global crisis comes fall in share prices and Margin calls - meaning that the Gold in the Marwadi kadai suddenly starts losing value - so the marwadi will call for more money to give him reassurance or asks some of this money back or sell the gold while it still will raise money to cover Raju's debt.

Raju is slowly running out of shares..and more and more shares as collateral gives less and less money from the marwadi - not enough. Too few shares with Raju will trigger all sorts of market speculation, tamasha and a possible takeover.

So he trys to bring in the Maithyas thing - to M-seal the Hole in the balance sheet a little - then the excrement hit the proverbial fan - and the rest, as they say, is history.

Sort of like a classic example of how a global liquidity crisis will trigger such collapses - and cons of using fluctuating securities (Shares, mortgages etc) as collateral to take out CASH on loan. If youve borrowed 0.7X against a share valued at X (seems safe, from the lender's perspective, no?) - then the share value falls to 0.7X - the lender asks you to provide additional collateral to keep the Ratio of Cash lent TO Collateral at 70 : 100 - (MARGIN call) -within 48 hours - or he sells the share for 0.7 in cash, which adds further SUPPLY (read: Fuel) to what is already a falling market for those shares.

This knocks off the price of a similar Share owned by a neighbour (say) to 0.6X - and if the same Financial company holds the neighbor's Share too - they ask the neighbour whos borrowed 0.5 X - for money - to bring ratio up to 70: 100 - or they sell .. and so on.. keep selling shares... triggering 10% drops in one session and so on.

I am sure this whole satyam episode can be sort of written up as a book to explain basic concepts in economics, finance, corporate governance etc. a la freakonomics. because it has bits and pieces of everything involved.

Easy, no ?