And what a way to be jolted out of slumber:Stock markets lose a delirious 750+ points in a single session all because our Mr. raju decides to trigger panic in already twice bitten and thrice burnt investors. Apparently our Gentleman finally heard the voice of his inner conscience by writing to the board in no uncertain manner - that he has been virtually creating wealth out of nowhere. Oops sorry - he was actually NOT creating wealth after all. He was only overstating Revenues, Profits, Cash, Margins, Debtors and was understating liabilities - virtually everything that will llok like "enhancing share holder value".
For reading a copy of his "confessional letter" click here.
So where does this leave us - some ruminations
1. Is Raju stating the truth and nothing but the truth in his letter. My take - that's quite unlikely. He is now at a stage where an investigation into his deeds would have anyway revealed everything - so he might be trying to take the "moral high ground". More importantly - he might be trying to save the skin of his family and his confidantes by absolving them all from the deed. Is it possible that a brazen fraud of such mammoth proportion can be done by just him without the knowledge of people that he named in his letter? Again unlikely. What seems to be a more plausible explanation is that he will need this people in the long legal battle thats ahead of him. So obviously his letter is "too little too late".
2. In fact the claims made by Raju in the letter look so - charmingly heroic- that one feels like dispensing with them immediately. He claims "The gap in the balance sheet has arisen purely out of inflated profits over a period of last several years"........... Now why would someone inflate profits - because one is eyeing higher valuations. Isn't the motive then personal profits (whichever be the route) as the poor shareholder would only be left with valueless paper at the end of the ordeal.
He further claims -
"Neither I nor the Managing Director (including spouses) sold any shares in the last eight years..."
and then in the same breath (I mean the letter) he says
"In the last two years a total of Rs. 1230 crores was arranged to Satyam (not reflected in the books of satyam) by pledging all the promoter's shares...."
and later in the same letter he artfully writes
"... the last straw was the selling of most of the pledged shares by lenders ....".
In nutshell what he is saying is that he did not sell the shares - he only pledged it to lenders - who sold them and yes !! he did not use the money - he arranged it to Satyam but of course he did not reflect them on books. And whose word do we have to believe it - Yours truly - Raju. At least I am not in the mood to be that naive.
He has the temerity to write in the letter that "Neither me nor the managing director took even one rupee/dollar from the company and have not benefited in financial terms on accounted of the inflated results". Wow !! Someone can claim that is a surprise. Again whose words do we have to believe this as well? Only his - Right !! Frankly it is too much to digest this - oh !! I put my reputation, morals and myself at stake for the growth of the company - when what he did was plainly a fraud.3. Assume for a second that what he writes in his letter is true. Well then, we are faced with intensely introspective situation. The current times and its competitive pressures to consistently outdo one's own performance and that of the competition year after year can lead a person into a vicious circle of presenting lies and then perpetrating them ad-infinitum till the burden becomes self destructing. The glory of basking in the flash lights of media cameras and of becoming a hero who keeps meeting the expectations of people without fail could be so compelling - is a chilling idea. No, I would still like to believe that he is a glib liar.
4. One big question that faces the entire System, Regulators, Government, in fact the entire country is what the heck were we doing when Raju was cooking this mystery. No one - his colleagues, internal-external auditors, various tax departments, regulating agencies, watchdog bodies, board of directors, independent directors - simply no one could blow the whistle on the fraud. It is just too much of an impossibility that simply no-one knew of the fraud (at least that part of the his letter has to be a lie) and hence there is only one implication - that everyone from top to bottom are part of the rot. It is frightening but most probably the truth.
5. Entire financial fraternity from the investment bankers to the fund managers and the bankers who deal with corporate companies day to day have to learn many lessons from this saga and the most important of them is that they have responsibility far bigger then returning a certain percentages on the funds they have attracted. It is to a large extent their duty to ensure that unscrupulous business people are prevented from eroding share holder value in such tragic manner.
6. Above all - the Indian public, media, investors et al. need to be more aware, watchful, demanding and sceptical. The ease with which we trust is misplaced in today's world. We live cosily in the make believe world created by media czars who seem sold out to their sponsors, advertisers and event managers. What else can explain the immense respect that people like Raju achieve by savvy management of communication in the media.
7. What is the next step? If the apparently rotten system has to maintain some of its credence - what is required is swift action. Quick, thorough and transparent investigation followed by booking the guilty and punishing them in the most stringent possible terms is the only way to ensure that future Rajus of the corporate world will feel a bit deterred when resorting to such brazenly unscrupulous acts.
As a concluding thought a word from a respected journalist on her blog - looks as confused as I am.