Satyam under probe for ‘inflating’ sales & profit

In an echo of the scams plaguing the US, the Department of Company Affairs today announced a probe into allegations — including incompl...

In an echo of the scams plaguing the US, the Department of Company Affairs today announced a probe into allegations — including incomplete accounting and squandering funds — against Satyam Computer Services, India’s fourth-largest software exporter.

The announcement sent shares into a tailspin; by early morning the shares sank 5.2%, to Rs 210.50 and, within just 15 minutes of trading, over 21 lakh Satyam Computer shares changed hands. Later, though, they staged a partial recovery.

The Hyderabad-based Satyam issued a short statement later in the day saying the company had not violated any law and was confident of defending its position. “The company has already responded in detail to the DCA’s letters seeking clarifications and refuting each of the items raised in them,” the statement added.

Earlier this month, Rolta India’s share price had been hammered down by investors following reports that the company had inflated sales and overstated profits. Rolta then stated that it had included inter-divisional sales as part of the revenue.

DCA spokesman M.Y. Siddiqui told Reuters that the charges against Satyam — India’s 17th-largest listed company, with a market value of $1.43 billion — had been raised by ‘shareholders and others’. They included claims that directors improperly invested money in poorly performing subsidiaries, and that the company had evaded taxes, claimed excessive depreciation and failed to keep proper accounts.

‘‘Inspection of the books will reveal whether the complaints are valid or not’, said Siddiqui.

No prosecution, however, has been ordered by the DCA as yet. The DCA has ordered investigation based on a range of charges, including the company’s failure to reflect the profits from the sale of its Nasdaq-listed subsidiary Satyam Infoway, amounting to Rs 170.12 crore, in the profit and loss account as income from investments.

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The other grounds for prosecution were the alleged understatement of income, distorted figures in balance sheets, non-furnishing of particulars of managerial remuneration, higher rate of depreciation charged to profit and loss account and non-provision of interest accrued and due on debentures redeemable in April 1999 in the balance sheets of previous years.

Last week, Satyam Computer announced first quarter results that fell below analysts’ expectations.

For Q1 ended June 2002, the software company posted a 10.72% fall in net profit to Rs 108.44 crore compared to Rs 121.5 crore in the corresponding period of the previous year. Total income rose by 11.9% to Rs 471.48 crore from Rs 421.02 crore.