Analyst almost got Satyam nailed

There was at least one analyst who almost blew the lid off the Satyam scam. That too, as early as in October. At the IT major’s October analyst conference call, Kawaljeet Saluja from Kotak Securities had enquired the rationale for the $550 million lying idle in a current account. A deposit in a current account doesn’t attract any interest.

The analyst interaction, organised after Satyam’s second quarter earnings
of 2008-09, was addressed by chairman Ramalinga Raju, CFO Srinivas Vadlamani and Ram Mynampati, member of the board, who is now the acting CEO.

Citing no specific reason for parking the funds in the current account, Vadlamani said that the money was restricted to the second quarter only and thereafter the amount goes to the deposit account. Unconvinced by the answer, Saluja probed further.

“But Srinivas if I look at your deposit account for the last four quarters that number has remained absolutely flat and most of the incremental cash flows have been parked in current accounts. Would you highlight the reasons for it,” the analyst wanted to know.

He also pointed out that this trend had been continuing for the past few quarters.

To this Vadlamani replied: “No, basically what will happen is this amount will be basically in different countries and then we would bring them to India, based on the needs. Some of them are in overnight deposits and we have kind of placed them into normal term deposits. So from the next quarter onwards, we will see that as part of the deposits.”

Over a dozen analysts from both global and local brokerages-Bank of America, Goldman Sachs, Susquehanna, Gilford Securities, ICICI Securities and Edelweiss participated in the October 17 conference call. On asked about the low yield earned by Satyam on its excess funds, which was 5.3% against the industry rate of 9-10 %, Vadlamani replied that the yield is roughly around 8% or so.