The first day of 2009 opened on an optimistic note with stock markets showing some signs of life. And the stimulus package announced by the government a day later lead to a further rally after the weekend.
But Wednesday proved to be a black day in the history of corporate India. B. Ramalinga Raju, 54, and a Harvard Business School alumnus dropped a bombshell. He said he had been cooking the Satyam accounts books for the past 10 years. No one, except his brother, knew about it. The confession left everyone aghast and the question everyone was asking was how a company that has nearly 200 Fortune 500 clients, did this without the knowledge of its auditors, bankers and employees?
KPMG COO Richard Rekhy raises one such issue. He says the auditors touch base with the bankers for confirmation directly. If PWC got the verification letter from the bank then someone from the bank would be involved or it could be that the auditors did not ask for it.
The Institute of Chartered Accountants will conduct a due diligence into the working of the audit firm and the partner who signed the reports stands to lose his license if he’s guilty. SEBI, RBI and the ministry of company affairs are already in Hyderabad examining the books of Satyam.
Meanwhile the government moved in quickly. The minister for company affairs referred the issue to the serious fraud office; the SEBI and Income Tax officials began their investigations. The acting CEO of the company Ram Mynampati addressed a press conference on Thursday tried to take charge of the situation, but hardly managed to throw any light on the fraud.
The company is now seriously short of cash and admitted it didn’t know how it would pay future salaries. It has 53,000 employees on its rolls.
The stock dropped to Rs18.80 after touching a low of Rs6.30 on Friday. Many foreign institutional investors like Aberdeen and Swiss Finance Corporation sold their shares in block and exited.
The Satyam board is meeting on Saturday to announce its third quarter results. The company is yet to file any case against Raju. The police or enforcement agencies have not yet detained Raju or taken any preventive measures.
More on the Satyam saga is expected in the coming weeks as suspicion gathered whether Raju’s confessions were fully true.
The oil PSU employees are asking for better pay scales and the first lot to strike work was the employees of oil companies.
On Thursday power, fertilizer, steel, aviation services were affected. IOC, India’s largest refiner and retailer, admitted supplies were running short.
Sarthak Bidhuria, chairman, Indian Oil, says, “We are trying to see that after our aviation refueling, we do the retail outlet and LPG particularly in cities like Delhi, we have positioned people but obviously when 12,000 people are on strike its difficult for the five hundred people to manage work.”
There were long queues at petrol pumps as anxious owners of cars and two-wheelers topped their tanks. In Mumbai there was near panic situation as many bunks ran out of fuel. About 30 – 40% of petrol stations in Delhi, had run out of fuel.
But the strike came to end after the government told the striking employees that they could face legal action under ESMA if they continued being on strike. At the time of recording this bulletin on late Friday evening, employees from BPCL, Oil India Ltd, Indian Oil and GAIL had called off their strike.
Amidst economic and corporate gloom and doom if there is a ray of hope for the government. And it has come in the form of inflation figures. On Friday the inflation fell for the ninth consecutive week today to a 10-month low of 5.91% for the week ended 27 December, from 6.38% in the previous week. That is sharply lower than the peak of just over 12% in August.
The fall is due to a decline in prices of food and manufactured items. And that should come as a real relief to the government. A year ago it stood at 3.83%. The previous low was recorded at 5.69% for the week ended 23 February, 2008.
But not everyone is impressed. According to economists while the index is down the prices of essential commodities like cereals and pulses are yet to reflect the trend fully.