Archive for January, 2009

Does two wrongs make a right?

Wednesday, January 14th, 2009

Continuing with the Satyam saga, voices are now being heard which seem to suggest that Satyam would have survived if the merger plan with Maytas was carried forward instead of being stumped at the start. After all, the argument goes that since Satyam had no cash, atleast it would have assets on its books and all would have been hale and healthy.

Is that so simple? First of all, it?s in hindsight from which we know that Satyam had no cash on its books. I personally don?t believe that the entire money was fictitious and there has to be some amount of siphoning which has happened since hiding hundreds and then thousands of crores from everyone is not a small thing and one that has according to the confession lasted nearly 7 years. One also has to remember that Maytas itself it seems became aggressive over the last couple of years. Hence, it would have to be more of siphoning than just cooking the books on long term.

Coming back to the topic, there are two things that I personally dislike about the statement of Satyam having been saved if Maytas was allowed to be merged. First is the fact that even now, no one knows who did the valuation for Maytas and more importantly Maytas Properties. Hence, one can never be sure if those assets are in themselves real or just worthless papers.

Second and more importantly that would have allowed the Raju?s to go scot free. Afterall, if property markets would not have fallen, Maytas Properties would not have been in trouble and if Maytas Properties were not onto hard times, the Raju?s could have just filled back the deficit from their profits and no one would be the wiser.

While I applaud the move to dissolve the old board and come up with a new board, I am not sure what the current board?s intentions are. I for one believe that if they are really looking at safe guarding the interest?s of its employees, the best way forward will be to have a fire-sale of every domain they are working with the agreement being that the persons working on those project will be taken aboard by the company buying the domains verticals. This will have two positive impacts. One, customers will be confident that there will be no gap in the service they are being provided right now and Secondly, the morale of the Employees will be boosted.

Instead, if the board tries to revive the company, it will not only be a action in futility, but also open a Pandora?s box about government intervention in private entities. Afterall, thousands of companies go bust every year, hundreds of employees are thrown out, what is so special about Satyam other than the numbers would be a question to ask.

A very happy Shankranti and Pongal to all readers.

Prashanth

Posted in News & Views | 925 Comments »

Whose interest does LIC represent?

Thursday, January 8th, 2009
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LIC yesterday issued a Press Release stating and I quote,
“We have a 4.34 per cent stake in Satyam Computer Services Ltd. We have no plan to sell our stake, at least in the short-term.? He said LIC will play a positive role in helping the company and its employees”
If LIC was a Private Body, one could care less about how they go about doing things. But LIC has invested in Satyam using Money from Public (LIC Money Plus it seems has quite a big investment). Instead of being answerable to the public, they seem to feel that by not selling, they can be of support to the company. Ofcourse, helping the employees is a good deed. But, if they do not sell and the company still fails, would it matter for anyone except for those who have invested.
This is not a individual instance but has happened repeatedly. Infact, any company which has low promoter interest does not worry if Institutions have a high stake since they are sure that in case of any hostile takeover, the Institutions will support the management rather than the newbie.
I believe this attitude is changing, but we still have a fair way to go. The time taken by them to take decisions is so lengthy and messy that when faced with situations like this, they tend to remain motionless instead of taking decisive action since no one wants to be blamed if things do not go as panned.
To be fair to LIC, a whole lot of FII’s who have invested in Satyam have done nothing yesterday. Not sure what they are waiting for, but just a cursory look at his?letter tells that they have no money (the supposed $1+ Billion Reserves).?Add to it, the claim that their Net Profit Margin is 3%… oops, now how did they get to so low NPM’s. Since fund managers are supposed to know on the back of their hand, details about every company they have substantial investments in, seems a surprise that many of them were sitting still seeing their investments meltdown by the minute.
Just a few thoughts.
Prashanth

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Posted in News & Views | 1,419 Comments »