Satyam Employees - Jan Salary for you ?

A legendary entrepreneur overstated his company’s assets and understated the liabilities. Many clients who had reposed their trust in Satyam may feel cheated and might walk away. In the hypothetical scenario of Satyam facing a zero-revenue and zero-account receivables situation starting today, how long would it be able to pay its 53,000 employees?

The ‘fudged’ cash and bank balances could have lasted them 10 months but Ramalinga Raju has already confessed on Wednesday that Rs 5,040 crore out of the Rs 5,361 crore is non-existent.

Satyam pays Rs 522 crore in salaries and bonuses on an average per month, according to its last quarterly financial update. Along with this, it also pays a smaller amount of roughly Rs 10 crore in staff welfare and employee stock compensation expenses per month.

If you include items such as reimbursements for travel, communication and other personnel-related expenses - the monthly outgo for salaries would amount to Rs 580 crore.

Now with Raju stating that it had an actual cash and bank balance of only Rs 320 crore at the end of September 30, 2008 itself, this means Satyam could have practically paid a month’s salary or so at the most. But four months have passed since then and this is why there is more than a question mark on whether Satyam employees would be paid their monthly remuneration for January 2009.

“All the records were fudged. To find out whether something is at all left with Satyam, we need a full restatement of accounts. At this point, it is well nigh impossible to find out whether Satyam has any cash left with it, or not,” IT analyst Harit Shah of Angel Broking said.


Raju, in his 5 page confession, has already accepted that an amount of Rs 1,230 crore was arranged to Satyam to keep operations in the last two years.

“This was done by way of pledging shares and raising funds from sources. This could mean that not only was the money paid to Satyamites as salary a loan taken by the promoter group, but also that Satyam’s own resources would in all probability be extinguished,” says an industry source.

Without cash, Satyam promoters apparently arranged for working capital by taking loans. Now with Ramalinga Raju and his men leaving the company in doldrums, how and more importantly, who will raise fresh loans to keep paying salaries is the million dollar question.

via Economic Times