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Satyam fraud could net politicians too

HYDERABAD: In September, when the forthright chairman of the Delhi Metro Rail Corporation (DMRC) warned that the Hyderabad metro rail project won by a consortium led by Maytas Infra could be “a future political scam”, a furious Andhra Pradesh government threatened to sue him for defamation. E Sreedharan had touched a raw nerve by suggesting that the proposed metro rail project was essentially a sideshow and real estate was the main thing.

Four months on, a Rs 7,000-crore financial scam has been exposed at Satyam Computer Services, and it threatens to engulf the politicians in the scam that Mr Sreedharan had warned about. On January 7, Satyam’s founder B Ramalinga Raju claimed that the account books of the software company were manipulated for years to make it look much bigger than it actually was.

Mr Raju, whose son runs Maytas Infra, said sales, profit and cash balances were inflated and that he had pledged his shares to raise some Rs 1,230 crore and keep the company running.

But not too many people believe that Mr Raju, as he has admitted, is just a liar, and point to his claim about Satyam’s operating margin of 3% between July and September 2008 as proof that there is more than meets the eye. “If one goes by Mr Raju’s confession, Satyam’s operating margins is 3%, which is way less than the industry average. While large IT companies have an operating margin of over 20%, mid-caps have about 13-14%.

Considering that Satyam has some large clients, it prompts us to believe that cash reserves existed with the company and that the promoters siphoned off the money,” said Apurva Shah, head (research) at broking house Prabudhas Lilladher.

If the company actually had the cash and Mr Raju’s version of what happened cannot be true, how did the money disappear from Satyam and where did it go? Those who should have a pretty clear idea by now are the software company’s main bankers—ICICI Bank, Bank of Baroda, BNP Paribas, Citibank, HDFC Bank and HSBC
. In the normal course, Satyam’s statutory auditor PricewaterhouseCoopers would have demanded certificates from banks attesting to the existence of money in the IT firm’s accounts. Did the banks indeed certify that they had the money? Or were certificates forged and presented to PricewaterhouseCoopers?

Source / courtesy: ET