Fraud-hit Satyam Computer Services Ltd’s shares are currently among the most volatile in the market. The average difference in its intraday high and low has been as high as 17% in the past two months.
Why the company’s shares continue to be unstable even two months after B. Ramalinga Raju confessed to the swindle is that shareholders are still in the dark about its financial health. While it’s true that a restatement of accounts could take time, there are some basic details it could certainly share.
It’s not that the newly appointed board of the company has no information to share either. In the bidding process it has announced, the company will share financial, business and legal materials with shortlisted bidders, subject to non-disclosure agreements.
Of course, in all merger and acquisition transactions of listed public companies, there is some information that is shared only with serious bidders. But those are details such as names of top clients, etc.
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In Satyam’s case, minority shareholders still have no clue if Raju’s statement about the company having just a 3% profit margin is true or not. Or, for that matter, about the size of the company in terms of revenue and assets.
Analysts say a rough-and-ready method of valuing a software company could be to consider the number of workers and assign a value per worker. But there seems to be a question mark over those numbers as well.
In any case, how can anybody value a company with Satyam’s history if there’s no record of its liabilities?
Millions of Satyam shares are changing hands everyday at levels of Rs35-50. What if it turns out that the true worth of the company is Rs100, based on the financial, business and legal disclosures made to bidders during the due diligence process? That would be rather unfair to minority shareholders.
J.R. Varma of the Indian Institute of Management, Ahmedabad says that the company should have released some basic information by now, without waiting for the full restatement of accounts. He also feels that minority shareholders have been short-changed by not being given any say in the induction of a strategic investor.
Simply put, all information that is to be made available to the bidders should be made available to Satyam’s minority shareholders as well.
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Graphics by Paras Jain / Mint