Satyam may not disclose full story

The restatement won’t be accompanied by amended annual reports, profit and loss accounts and balance sheets for five of the six years, said a company official, who spoke on condition of anonymity.

Some analysts immediately raised questions about transparency at Mahindra Satyam, given the change of plan and what it implies for the firm they have struggled to track in the absence of clarity about its financials.

Mahindra Satyam had been expected to restate accounts for six years up to January 2009 after founder-chairman B. Ramalinga Raju confessed that he had doctored accounts to the tune of Rs7,136 crore over a period of several years. In addition, the company has to publish quarterly results from 31 December 2008 to the quarter ended 31 March.

Checking back: Mahindra Satyam headquarters in Hyderabad. The company had been expected to restate accounts for six years up to Jan 2009 after founder-chairman B. Ramalinga Raju confessed that he had doctored accounts to the tune of Rs7,136 crore over a period of several years. Bharath Sai/Mint

The Hyderabad-based firm, bought by Tech Mahindra Ltd in April 2009 and rebranded Mahindra Satyam, will only release complete accounts for fiscal years ended 31 March 2009 and 31 March 2010, said the official cited above.

They will be accompanied by a brief annexure known as prior period accounts, which will contain explanations for discrepancies between the old and new figures from fiscal 2003 to 2008, the official said.

“Indian law does not permit a company to restate the accounts which have been approved by shareholders at annual general meetings held every year. So we do not need permission from the Company Law Board" for publishing accounts in this format, said the official. “Numbers going back six years are not that important as long as the current picture is available. For now, a one-liner or so explaining each year’s financials will be given."

Analysts tracking Mahindra Satyam had been expecting it to release comprehensive accounts for at least one year prior to the fraud that Raju confessed to in January last year.

A chartered accountant who assisted the Serious Fraud Investigation Office in probing the Satyam case, said that while Indian law prevents a restatement of prior accounts, “it doesn’t say you can’t provide details on the basis of which Satyam will revalue assets".

“This means Satyam is not prohibited from declaring which bank accounts were inflated, which customer accounts had fake invoices raised against them and which debtor accounts are written off," said the chartered accountant, Y.E. Seshasai Babu.

Mahindra Satyam’s change of plan means it’s likely to release key numbers each year such as sales, tax deducted at source, interest income, and assets and liabilities, with the corresponding amount by which they had been inflated, said Ved Jain, a former president of the Institute of Chartered Accountants of India. “What amount of detail they provide in the annexure explaining the inflated amount is up to them. That will determine the transparency."

CLB in April 2009 gave Satyam time until 31 December 2009 to restate accounts. Mahindra Satyam subsequently got three more extensions, and has this month sought a fourth one to 30 September.

The ministry of corporate affairs has been asked by CLB for its view on Satyam seeking time till 30 September to “file the financial reports required by statutory bodies. It (the ministry) is in the process of making its reply", said a senior ministry official, who did not want to be identified.

Last week, a CLB bench headed by justice D.R. Deshmukh directed the ministry to give its reply over the plea for extension to publish quarterly results and other documents from the December 2008 quarter to the March 2010 quarter.

Analysts are sceptical about the latest format for the disclosure and some question the transparency level this implies.

“The last two years were a slowdown for the IT industry and given the trouble Satyam is having, we discount their performance anyway," said Srishti Anand, an IT analyst at ICICI Direct.com, who suspended coverage on the stock a few months ago for lack of information. “2006-2008, on the other hand, were a growth phase and so it is important to see how Satyam performed when the macro picture was clean. Now our comparison won’t be apples-to-apples."

Another analyst who resumed coverage on the firm recently and didn’t want to be named said its past record had already been factored into the stock price.

The analyst said he was disappointed by the lack of clarity on operational metrics, but said the firm had to be valued from scratch anyway. “When past accounts cannot be restated, there is no choice but to physically verify the assets they have currently and create a new balance sheet."

Some analysts had come away optimistic from an analyst-client meeting organized by Satyam in May, where they were told that the firm’s financials had improved and it had turned cash-positive.

“There will be a degree of scepticism now, of course," said Diptarup Chakraborti, principal research analyst at Gartner Inc. “However, when you do not have access of information, the important things are if client expectations are met, new clients are added, marketing strategies and success rates. As of now, these look strong. There is nothing murky about them."

In another development on Wednesday, a special court in Hyderabad trying the Satyam cases ruled that three chargesheets filed by the Central Bureau of Investigation be clubbed into one.

The first relates to fudging of company accounts and cheating of shareholders. The second deals with fake customers and raising of fake invoices. The third concerns the creation of false income-tax liabilities.

Sangeeta Singh in New Delhi and Reuters contributed to this story.

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