Friday, January 09, 2009


India Inc.'s worst fears have come true and what a start it has been to 2009, that too on the back of a depressing 2008 !!. January 7, 2009 would be forever remembered in the annals of Indian corporate history as the day of shame not just for one man and his company, but indeed for corporate India in general. And this is not any fly-by-night company that has its image in tatters. Till about a few weeks back, Satyam was one of the poster boys of the Indian IT industry : Over $ 2 billion in revenues, NYSE listed, over 50000 employees and, ironically, a recent winner of the Golden Peacock award for, amongst all things, corporate governance !!! All that now virtually lies in ruins.

The Satyam employees now face a bleak future in an already bad job market. With most clients virtually certain to pull out of their contracts (and these include diverse names like the World Bank and FIFA) and new business obviously impossible, these employees face a difficult task to finding new jobs. They are amongst the first to pay a direct price for all the misdemeanours of the Satyam top brass. I for one find it impossible to believe that Mr. Raju was the only one doing all this, as he stated in his letter. No doubt the auditors and the board of directors have a lot of difficult questions to answer.

For the market, this could not have come at a worse time. The last few days had seen the market holding on important support levels (3000 on Nifty and 10K on Sensex) and in fact, was trying hard to move up. All that hard work is now undone in a couple of hours of mayhem. As the market trades today (Friday) the carnage continues. And while the Satyam investors obviously have been shattered, a lot of other investors are seeing their portfolios shrink more rapidly than the polar ice caps. Even government owned and well performing stocks are getting a beating (BHEL down more than 3%, SBI down 2% etc). Of course, the market is slaughtering those companies that are seen as not having a particularly high reputation on corporate governance. Clearly, the market expects some more skeletons to come out of the closet. Now that the tide is running out, the world will see who is swimming naked !!. On the other hand, well-reputed stocks like TCS and Infosys have actually gained since Wednesday (of course, partly because the market expects them to perform well now that one big player has fallen) . This hopefully is not just a knee-jerk reaction but a sign of things to come, wherein companies would need to have good standards of internal controls in place in order to provide a fair return to their shareholders.

And what of India Inc. ? Hopefully, there will be the proverbial silver lining in this dark cloud. New and tough measures of auditing and internal controls would be in place. Corporate Governance would not be restricted to just making grandiose statements in the annual reports. Appointment of independent directors and the role that they play would be subject to even greater scrutiny. And hopefully, the corporate world would be able to come out of this mess stronger and better and prove to the investors, public and the world at large that there will be no more instances of satya(m)naash !!!



Nemo said...

Apt title! Cannot think of a better one..:)
A friend of mine posted on the same topic, he put a PS: Satyam means truth in sanskrit, but now its all about lies!

Monsieur K said...

nice post dude!
and liked the title - very apt!

priya said...

Nice post Amit.

Creatively coined title that clearly highlights what Raju&Co have done!!!

Those involved should be ashamed of themselves for this embarrassing failure!!!