The fraud at Satyam Computer Services has resulted in a complete erosion of net worth in India’s Number Four software firm.
Net worth, a financial measure, denotes the assets of the company after deleting the liabilities it owes to others and is a measure of creditworthiness.
“As per the restated financials, the net worth of the company is negative,” said KR Choksey Shares and Securities in a note on Satyam.
Disgraced exiting chairman B Ramalinga Raju, in a confessional statement sent to the board of directors of Satyam said the company’s financial statements had overstated cash balance of Rs 5,040 crore, accrued interest of Rs 370 and debtors of Rs 2,160 crore and understated liabilities of Rs 1,230 crore.
According to Satyam’s balance sheet, it had assets of Rs 8,822 crore at the end of March 31, 2008 and an equal amount of liabilities. If the overstated assets are deducted, then the total assets shrink to just Rs 3,406 crore. Similarly, if the understated liabilities are deducted from total liabilities, the total liabilities expand to Rs 7,592 crore.
After adjusting the overstatements and understatements, the total liabilities of Satyam would be Rs 4,186 crore more than its adjusted total assets of Rs 3,406 crore.
The overstated assets included the non-existent investments in fixed deposits. The 2007-08 annual report had said Satyam has invested Rs 3,308.41 crore in “fixed deposits with scheduled banks”.
“Ramalinga Raju resigned and admitted to manipulating and inflating the company earnings, as well as balance sheet items. After adjusting for these items, we find the book value of the company to be negative,” the note by KR Choksey said.