Troubled IT firm Satyam Computer is likely to witness a free fall following its Chairman Ramalinga Raju's resignation and his admittance of a major accounting fraud, while analysts expect the scrip may plunge to Rs 20 levels in coming days.
"Book value post recent disclosure could be potentially negative. Do not rule out stock falling to sub Rs 20 levels," brokerage firm Emkay Research said in its report on Satyam.
Marketmen said that the fundamentals of the company have been shaken completely and the malpractices in the financial disclosures has shattered investor confidence.
"This is a big blow for the investors, employees and anybody associated with the company. It is also a shocking news for the FIIs and majority of them will exit the stock," Geojit Financial services Head of Research Alex Mathews said.
The scrip today plunged nearly 78 per cent to settle the trade at an all-time low of Rs 39.95, on the BSE.
"The stock is likely to go lower even further as it closed below the Rs 49-level, which it had last witnessed in March 1997," Mathews added.
Analysts believe that the sell off in Satyam would trigger buying in the stocks of rival IT majors leading to their scrip moving up.
"Going by the current trend, Infosys and Wipro would be a good buy than the company whose management is involved in financial malpractices," Ashika Stock Brokers Research Head Paras Bothra said.
"The scrip can witness levels down to as much as Rs 20. The company was operating at a margin of three per cent, the lowest by any IT company. It was doing business on cost basis. Some more sell offs and downturns are in store for future," Arun Kejriwal of Kejriwal Research and Investment Services said.
"It is disastrous for the company. Investors have been completely misguided. The scrip would taste new lows. What the level would be, cannot be ascertained now. The scrip is such that people would not think of investing in the near future," Bothra said.
Marketmen said the incident has raised question on the credibility of the company's accounting practises.
"The company right now has no valuation. Right now no body would be interested in investing in a company, which has no locus standi. It is difficult to say whether the scrip has witnessed its bottoms, as of now," SMC Global Vice President
Rajesh Jain said.
Satyam stock holds a 1.56 per cent weight in the 30-share bluechip index Sensex. Following the same, the benchmark index also plunged over 749 points, or over seven per cent, to settle at 9,586 points on the BSE.
Ramalinga Raju, today resigned as Satyam chairman, after admitting to financial wrong doings in its balance sheet. He was under attack over the USD 1.6-billion acquisition fiasco of firms promoted by his family, and the same day, Satyam lost as much as 83 per cent from its December 16 closing price.
Meanwhile, a host of domestic and foreign brokerage firms, including Credit Suisse, Religare and Angel Broking, today suspended their coverage of Satyam Computer shares.
Most of the brokerage firms, in their research notes, stated that they were suspending the rating and target price on Satyam, as the company's true book value is not known, while the revenues and profits are also not reliable.