Mahindra Satyam has come a long way since the scam broke out two years ago. And today for the first time since then, the company presented its financials for FY09 and FY10.
The dose of reality put out by the management of Mahindra Satyam was welcome. Being more realistic, clearly there was no magical wand that could have miraculously wiped off all the pains of the scam. One had to grimly bear the pain, actually relive the pain as the skeletons or the extent of the fraud came tumbling out.
Fictitious revenue, fictitious debtors, fictitious tax and interest, fictitious cash in bank. Everything was fictitious. You can fool everyone for some time, but not all the time. The sheer gumption with which Ramalinga Raju fooled everyone is simply difficult to comprehend with. He spun a multi crore fraud to keep the company showing exceptional numbers. Finally, with the fraud out in the open, so is the loss.
- In FY09, consolidated net loss was at Rs.8176.80 crore on consolidated net sales of Rs.8812.60 crore.
- In FY10, the company had consolidated net sales Rs.5481 crore and consolidated net loss at Rs.124.60 crore.
- As was expected, EBIDTA margin before exceptional items came at 8.3% as against 3.4% in FY09. This was mainly on account of some clients who had left and the company was obligated to complete the work. More of a spill over effect.
- Cash and bank balance as at 1st April 2010, at Rs.2176 crore.
- Its secured loans stood at Rs.814 crore which has been repaid and Rs.42 crore loan outstanding on salary accounts. The company has been able to extinguish all bank borrowings within the last one year.
- Fraud related adjustments to the tune of Rs.6200 crore.
- In FY09, the company had 500 clients, and after the scam broke out , there was a huge exodus, which came down to 350 active clients now. 44 new clients were added. Additions mainly in financial, healthcare, manufacturing and PSU sector.
- 45,000 employees in FY09, which in FY10 stood at 27,000 employees.
- Class action lawsuit to take 2-3 years, provided Rs.1000 crore for Upaid and other settlements.
- Will take call on re-listing on NYSE post US GAAP compilation of numbers, which could take another 6-8 months.
Numbers of FY09 are actually irrelevant today. The company declared it more as a compliance need. The management has stressed that it is a 3 year process to turnaround Mahindra Satyam. We are now just 1.5 years into the process, so it would take another year or two for the company to get healthy and get running.
If someone expected a guidance, that was being extremely immature. Yes, what the company could have done is give us a hint about the direction in which the company was headed in current Q1 and Q2. FY11Q1 and FY11Q2 numbers are expected to be announced on or before 15th Nov. Now that piece of most relevant information did not come through. The company also did not throw light on the geographical revenue spread of the company.
What also did not come through was the merger ratio with Tech Mahindra, which could have been the next trigger for the share price. It has not yet been able to decide whether Tech Mahindra to merge with company or the other way round. But it gave a time span of 9-12 months for this merger to be completed.
The newly stated management surely deserves a pat on the back for having worked through the gargantuan mess which Raju left and getting the company to where it is today.The scam tainted company is finally current and at par with rest of India Inc.
For now, the market will have to just digest all this truth and be happy with the fact that the ghost of Raju is finally leaving the company. Lets wait for a good future.
Regards.
Santosh Sharma
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