Any More Skeletons In Satyam's Cupboard?

As the race for Satyam hots up and the bidders for the company make their intentions clear,investors in the company find themselves at a crossroads.Those who were wise enough to short sell Satyam the day of the Raju disclosure have ended up quite wealthy. Those who bought the Satyam stock at a time when it was trading for less than Ten rupees also find that the value of their investment has risen. For the current Board,the priority has been to make Satyam suitable for sale which they have done quite well. All eyes are now on the bidding process for the company. What could spoil the party could be more skeletons tumbling from Satyam’s cupboard.

This is what investors in the company should watch out for as should those wanting to buy the company.

Needless to say the latter are because a number of things can go wrong for the company which buys Satyam:

The Accounts: The very numbers that have caused the company to be in the situation it’s in today were found out only because of Ramalinga Raju’s disclosure. The extent of the falsified accounts has not yet been established. We are aware that the profits were inflated many times over but until an entire independent audit is complete the numbers will be hard to trust. The new Board has agreed to let shortlisted bidders take a look at financial accounts and legal papers.

Transparent Bidding: The Board of Satyam is composed of directors who would like to ideally pass on the duty of the company’s welfare to a new management. In this regard some have preferred choices and might favor particular companies making the process not entirely transparent.

 Ramalinga Raju: The ex chairman of the company is finding ways to evade investigative agencies as much as possible. Confidential details of the company are with him and will continue to be with him unless the investigative agencies break him down.

Lawsuits: A number of investors particularly foreign have sued Satyam for fraud. The company has been having a hard time trying to diffuse the situation. Satyam is listed publicly abroad. The new company has got to be careful in making sure that it does not absorb the legal liabilities of Satyam. Lawsuits are unlikely to go away with beleaguered investors wanting their pound of flesh.

The Old Management: Elements within the company are around that are still loyal to the old management headed by Raju. Key data lies with them and some have chosen to be disloyal to the new board. It is necessary for the new company to weed these elements out.

Maytas: Unfortunately for Satyam it has been unable to bring Maytas under a new board. The government which at one time looked certain to overhaul the company with new members has been unable to persuade the Company Law Board to dismiss the current Board. It has only managed to get independent directors on the Board of Maytas. Maytas’ finances are linked to Satyam. The new company will have a lot of work to disengage Satyam from Maytas.