Hyderabad, September 30: It is likely to take another two years for Mahindra Satyam (MSat) to recover completely from the staggering accounting fraud perpetrated by B Ramalinga Raju that debilitated it last year.
The company’s first financial results since the scam broke in early 2009 showed that it cut its losses down to Rs 125 crore on a revenue of Rs 5,480 crore for the financial year ended 2009-10. That’s a lot better than the results for the financial year 2008-09 when it posted a net loss of Rs 8,177 crore on a revenue base of `8,813 crore.
Declaring the results here on Wednesday, TechM also gave a sneak preview of Ramalinga Raju’s ingenuous manipulation of the accounts.
“With this announcement (results), we have fulfilled an important commitment and kept our promise of transparency and agility,” said Vineet Nayyar, chairman of MSat and vice-chairman of Tech Mahindra which took over the scam-tainted company last year. “It marks the beginning of a more significant journey of growth in the future.” Company officials said MSat’s merger process with its parent would begin after it announces its quarterly results in November. Nayyar said TechM had inherited MSat with a negative net worth but managed to clear all debts and restore the company’s net worth to `1,800 crore. The announcement of the financial statement will help the company bid for new orders besides paving the way for a merger with TechM.
Nayyar said MSat incurred exceptional expenses relating to the accounting scam to the tune of Rs 799 crore and Rs 416 crore during 2008-09 and 2009- 10 respectivelyExplaining the extent of the accounting fraud, Nayyar said, as a result of the fictitious revenue and tax declarations made by the previous management, the total impact on MSat’s profit and loss account stood at about Rs 6,795 crore during fiscal 2009.
“We inherited a company with negative networth. But, we have been able to extinguish all the bank borrowings and the company’s current networth is positive,” he said.
The past sixteen months since we took over, have possibly been the most gruesome and challenging, yet most exhilarating of my career spanning 40 decades,” said Nayyar.
Following TechM’s cost rationalisation, MSat slashed its headcount nearly by half to 27,474.
As of Sept. 2008, its employee strength including subsidiaries was over 50,000 and expenditure on staff Rs 3,981.10 crore in 2009-10.
Similarly, it has a cash and bank balance of Rs 2176.8 crore as of March 2010 with about 350 active clients as against the 500 prior to the scam.
Citing the matter as sub-judice, the company declined comment on the fate of the `1,200 crore liabilities and claims made by Maytas Infra Ltd., and Maytas Properties regarding inter-corporate deposits.