Faced with numerous lawsuits and cash that may be enough only to honour a month’s salaries, the key question is if Satyam will survive. The press conference chaired by the company’s interim CEO hardly helped clear matters. One of the key loopholes in the outgoing chairman’s confessional statement was the assertion that the company had an operating margin of just 3% in the September quarter. The new management completely skirted questions related to this, citing that they’re not aware of what margins the company operates at. While senior operational managers may not have detailed knowledge about the company’s Ebitda (or operating profit) margins, they will certainly be aware whether each of the projects that it has entered into is profitable. At the very least, they could have revealed just what percentage of Satyam’s projects has been booked at rates that are profitable at the operational level. This unwillingness to explain even matters that they should have been aware of as operational managers shows that the situation at Satyam is as murky as ever.
The best possible outcome for the firm would be something akin to what happened at Lehman Brothers, where Nomura stepped in and picked up the bankrupt company’s European, Asian and West Asian operations, while staying out of the legal mess the firm was in.
Any acquirer of Satyam now has to worry about existing and potential lawsuits. The only way out is for the government to act quickly and put only the business or business verticals on the block, while ring-fencing acquirers from the legal mess that Satyam is in. But progress in this area will be impeded by the prolonged bankruptcy procedures in the country.
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