Click to play videoIt’s a massive blow to India Inc and the worst fraud in corporate India's history. But how does the Satyam shocker affect you as an investor or as an employee or as someone who has the company’s offer letter? Market Analyst S P Tulsian and former SEBI member Professor Jayanth Varma answered some of these questions on a CNN-IBN special show.
CNN-IBN: Is it wise to join Satyam now? Will other firms acquire it?
SP Tulsian: I don’t think future of 53,000 employees hangs in balance. Many of them may not get reemployed even if new acquirer comes – which itself is an uncertain situation. You do not know if it will happen. He should look at the appointment letter given by Satyam as non-existent and look for other options.
CNN-IBN: Where does India Inc’s credibility stand?
SP Tulsian: We have paid a price already. The market has corrected itself by seven per cent across the board. There have been concerns about companies that have taken a 20-25 per cent beating. When we need the funds from the overseas investors, we’ll have to be very cautious. We’ll be exercising due diligence and deep caution. I hope this becomes a one-off case and they don’t carry the same impression of the other companies of India Inc.
CNN-IBN: What will happen to the stock price of Satyam? Has it tanked fully could it fall further?
SP Tulsian: That’s the anxiety of all investors. If you see the transactions executed today, we have seen all overseas institutional investors having exited from the stock by selling it within the range of 40-80. We have seen 30 per cent – Rs 20-cr worth of shares – getting marked for delivery coming from overseas investors. They are very wary of these things. In fact all investors have not sold. So it’s difficult to say if the share has touched the bottom. I don’t think further damage can happen from here on. The beating it has taken today is mainly because of foreign institutional investors selling and 30 pc of the company’s issued equities getting transacted on one day. My advice is remain invested, you’ve already seen a loss of up to 80 pc of the cost price.
CNN-IBN: Will Govt or SEBI step in to help Satyam?
SP Tulsian: I think the Government is on the job, SEBI is dispatching its rescue team on Thursday morning. I don’t think the affairs of the company can come to a grinding halt because ultimately the future of 53,000 employees is at stake and so is the credibility of the country. The government is concerned and realises all this.
CNN-IBN: I buy stock on the basis of balance sheets and annual reports? If those are fake, how do I make a decision?
SP Tulsian: Let me confess that we are all slaves of the balance sheets that we get every quarter. Unless you held the people responsible – auditors and bankers in this case – and penalize them severely, no precedent can be set. If executive and independent directors, who have good credibility, haven’t been able to set a precedent, we analysts are nowhere.
CNN-IBN: This scam throws up so many issues in a market that’s shaky. What is the first priority, given the gravity of the situation?
Jayanth: I think first of all that the something needs to be done very quickly. There is a vacuum at Satyam and that needs to be fixed. I think it’s only the government and the company law board that can do that. Because the promoters are gone, all the independent directors are gone and even if they are not gone, they have no credibility. So the government needs to appoint a board or a minister or a receiver or somebody to take custody of Satyam’s assets.
CNN-IBN: Why was the fraud not detected earlier?
SP Tulsian: You rely on the auditors to provide details. They are to blame. Even the bankers are to blame. How can they rely on Raju who says an FD of Rs 5,000 cr does not exist?
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