Satyam is imploding as I type out this blog.
The chairman of Satyam Computers has resigned. In his letter to the board of directors he has confessed that the balance sheet was inflated.
Consider this ...
In the September (Q2) 2008, the balance sheet showed an operating margin of 24% as against merely 3% of the revenues. The balance sheet shows an accrued interest of Rs 376 crores, which is non-existent.
In his letter, the chairman says "it was like riding a tiger, not knowing how to get off without being eaten."
Breaking news on all channels indicate that all major clients are washing their hands off Satyam. They are terminating their services.
So, why was this disclosure made now? Is it just because "tremendous burden I am carrying on my conscience" as stated in the letter? Or do you think this is a domino effect of the aborted Maytas deal?
Actually it is nothing of that sort. And this is my understanding ... though I cannot prove it.
Scams operate well when there is plenty of cash around; when banks are more than willing to part with cash where ever they see profit coming in. But when cash is tight and the banks are less than willing to provide loans, the bottom falls off and scams are exposed. Case in point: Madoff and his Ponzi scheme.
And I bet that if every thing was fine and there was no cash crisis this would have gone for a very long time.
Watch out for this space. If the credit crisis prolongs you will see more such skeletons tumbling out.
So in a way such crisis is good. It has a purgatory effect on a system. Rotten apples are exposed and that actually helps the system overall in long run.
And if you see an expert telling you that credit crisis was the reason behind the Satyam implosion, remember you read it here first!
Question: Who are their accountants?
Note: The picture used here belongs to Tory Byrne. To see more pictures, visit her gallery.
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