In a little over a year post takeover, Mahindra Satyam finally declared its past two fiscals’ results on September 29, 2010. B&E jumps inside the numbers and brings you the analysis!
“Good judgment comes from experience, and a lot of that comes from bad judgment.” When Will Rogers made this statement historic, he wouldn’t have expected the corporate world to make this the basis of their pristine learning. Well, they did, and the top examples are in the M&A world, where the most profitable bets are generally not made on the best performing companies, but rather the worst performing ones – as they’re undervalued, yet have intrinsic worth. Recession left a number of such companies in the global economy, ripe for the picking.
Satyam was one such firm alright, undone by the malpractices of its own founder, Ramalinga Raju. When Tech Mahindra acquired the company on April 13, 2009 for Rs.58 per share (in fact, the Satyam stock had once reached below Rs.10 levels), it was quite obviously a purchase that was done with the future, rather than the present in mind. Satyam had a promise surely. But apart from the fact that the company had been underperforming its peers, there was the huge accounting muddle to solve. Revenue was overstated by Rs.53.62 billion from April 2002 to September 2008. Profits, more so. Given that, when Mahindra Satyam decided to finally declare it’s ‘true’ results for the past two years, apprehensions were clearly on their inflated high.
The good news is that Mahindra Satyam’s results for FY 2008-09 and FY 2009-10 (released on September 29, 2010) are, in one word, not shocking. Revenues for 2008-09 stood at Rs.88.12 billion and dropped to Rs.54.81 billion by 2009-10, a telling fall of 37.8%. Net loss was a far more relieving statistic for the last fiscal at Rs.1.25 billion compared to Rs.81.746 billion for 2008-09, which would give the impression that the company has just about bottomed out with respect to its financials; and the liabilities are on their way out. A class action suit is still pending from US investors and there are 37 Indian companies claiming unpaid liabilities to the tune of Rs.12.3 billion from the Raju family. But the company claims the liabilities are done and over with. Vineet Nayyar, Chairman, Mahindra Satyam, commented on the results, “With this announcement, we have fulfilled an important commitment and kept to our promise of transparency and agility. It also marks the beginning of a more significant journey of growth and the future.”
One of the biggest contributors to the reduced loss is the reduction in employee costs by 34.45% to Rs.39.81 billion. There was a mass exit across the hierarchy over FY 2009-10. The headcount stood at 27,000 at the end of the year compared to 44,000 in the beginning. Just like employees, Tech Mahindra also faced an exodus of customers, even large ones like Coca Cola, Novartis, Pfizer, BP and Telestra. In all, it lost around 194 clients and added 44 clients in FY 2009-10.
“Good judgment comes from experience, and a lot of that comes from bad judgment.” When Will Rogers made this statement historic, he wouldn’t have expected the corporate world to make this the basis of their pristine learning. Well, they did, and the top examples are in the M&A world, where the most profitable bets are generally not made on the best performing companies, but rather the worst performing ones – as they’re undervalued, yet have intrinsic worth. Recession left a number of such companies in the global economy, ripe for the picking.
Satyam was one such firm alright, undone by the malpractices of its own founder, Ramalinga Raju. When Tech Mahindra acquired the company on April 13, 2009 for Rs.58 per share (in fact, the Satyam stock had once reached below Rs.10 levels), it was quite obviously a purchase that was done with the future, rather than the present in mind. Satyam had a promise surely. But apart from the fact that the company had been underperforming its peers, there was the huge accounting muddle to solve. Revenue was overstated by Rs.53.62 billion from April 2002 to September 2008. Profits, more so. Given that, when Mahindra Satyam decided to finally declare it’s ‘true’ results for the past two years, apprehensions were clearly on their inflated high.
The good news is that Mahindra Satyam’s results for FY 2008-09 and FY 2009-10 (released on September 29, 2010) are, in one word, not shocking. Revenues for 2008-09 stood at Rs.88.12 billion and dropped to Rs.54.81 billion by 2009-10, a telling fall of 37.8%. Net loss was a far more relieving statistic for the last fiscal at Rs.1.25 billion compared to Rs.81.746 billion for 2008-09, which would give the impression that the company has just about bottomed out with respect to its financials; and the liabilities are on their way out. A class action suit is still pending from US investors and there are 37 Indian companies claiming unpaid liabilities to the tune of Rs.12.3 billion from the Raju family. But the company claims the liabilities are done and over with. Vineet Nayyar, Chairman, Mahindra Satyam, commented on the results, “With this announcement, we have fulfilled an important commitment and kept to our promise of transparency and agility. It also marks the beginning of a more significant journey of growth and the future.”
One of the biggest contributors to the reduced loss is the reduction in employee costs by 34.45% to Rs.39.81 billion. There was a mass exit across the hierarchy over FY 2009-10. The headcount stood at 27,000 at the end of the year compared to 44,000 in the beginning. Just like employees, Tech Mahindra also faced an exodus of customers, even large ones like Coca Cola, Novartis, Pfizer, BP and Telestra. In all, it lost around 194 clients and added 44 clients in FY 2009-10.
Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).
and Arindam Chaudhuri (Renowned Management Guru and Economist).
For More IIPM Info, Visit below mentioned IIPM articles.
Zee Business Best B-School Survey 2012
Prof. Arindam Chaudhuri's Session at IMA Indore
IIPM IN FINANCIAL TIMES, UK. FEATURE OF THE WEEK
IIPM strong hold on Placement : 10000 Students Placed in last 5 year
IIPM's Management Consulting Arm-Planman Consulting
Professor Arindam Chaudhuri - A Man For The Society....
IIPM: Indian Institute of Planning and Management
IIPM makes business education truly global
Management Guru Arindam Chaudhuri
Rajita Chaudhuri-The New Age Woman
IIPM B-School Facebook Page
IIPM Global Exposure
IIPM Best B School India
IIPM B-School Detail
IIPM Links
IIPM : The B-School with a Human FaceProf. Arindam Chaudhuri's Session at IMA Indore
IIPM IN FINANCIAL TIMES, UK. FEATURE OF THE WEEK
IIPM strong hold on Placement : 10000 Students Placed in last 5 year
IIPM's Management Consulting Arm-Planman Consulting
Professor Arindam Chaudhuri - A Man For The Society....
IIPM: Indian Institute of Planning and Management
IIPM makes business education truly global
Management Guru Arindam Chaudhuri
Rajita Chaudhuri-The New Age Woman
IIPM B-School Facebook Page
IIPM Global Exposure
IIPM Best B School India
IIPM B-School Detail
IIPM Links
