Investment Valuation in India

IT major Satyam Computers, after being in the news for all the bad reasons has reported a major scam which left the country shocked. The major developments: Satyam Chairman B Ramalinga Raju resigns as Chairman and issues a letter stating that he has been involved in major misrepresentations of accounts. The balance sheet carries as of September 30, 2008 a) Inflated (non-existent) cash and bank balance of Rs 5,040 crore (as against Rs 5361 crore reflected in the books) b) An accured interest of Rs 376 crore which is non-existent c) An understated liability of Rs 1,230 crore on account of funds arranged by Raju d) An over stated debtor position of Rs 490 crore (as against Rs 2651 reflected in the books. For 2Q 08, “reported revenue of Rs 2,700 crore and an operating margin of Rs 649 crore (24 per cent of revenues) as against the actual revenues of Rs 2,112 crore and an actual operating margin of Rs 61 crore (3 per cent of revenue)”. “In the last two years a net amount of Rs 1,230 crore w...