Yawning gap in Satyam’s balance sheet

Corrected: The Assets’ side total is Rs 2889 crore and not Rs 2936 crore as was earlier stated, in the last paragraph.

Satyam’s balance sheet size as of Sep’08 may shrink by 67%, and networth may be only 15% of the stated figure. Have taken Satyam’s audited results for Q2’09, for the standalone entity, since B. Ramalinga Raju’s letter refers to this. 

Making some assumptions, have restated its financials just to get a view. Use these calculations just as an indicator; the final restated financials may look very different, depending on what the auditors discover further. These calculations are based on the accounting assumption, that every entry has a corresponding impact.
1. Satyam’s balance sheet size has shrunk from Rs 8,795 crore to Rs 2,889 crore accompanied by a sharp decline in its networth.
2. Its debt to equity ratio stands at over 1:1.
3. Its net current assets figure shrinks to Rs 770.15 crore.

Assumptions and steps (based on Mr Raju’s statement):

1. Satyam’s cash balance is only Rs 272 crore and not Rs 5,312 crore as stated (the statement says Rs 5,361 crore but this is the cash figure in the consolidated books)
2. Accrued interest on FDs is nil against Rs 376.34 crore
3. Sundry debtors has been reduced by Rs 490 crore
4. Rs 1230 crore has been added to its unsecured debt burden, the money arranged by Mr Raju.

Have not considered the revenue figures stated here. Instead, the Application of Funds or the assets side of the balance sheet has been totalled. That revised figure is Rs 2889 crore. From this figure, the sources of funds or liabilities’ figures (other than reserves and surplus) are deducted. The number you get is the reserves (balancing figure). So, these back of the envelope calculations show that the reserves have been overstated by Rs 7136 crore. It is also possible that these numbers could be hidden elsewhere, for example current liabilities may be higher than stated, but have relied on Mr Raju’s statement about the numbers. That’s, of course, a huge leap of faith.


  Original Revised
  Sep’08 Sep’08
Sources of Funds    
Share Capital 134.7 134.7
Share Application Money, pending allotment 2.76 2.76
Reserves and surplus 8392.23 1255.89
Net Worth    
Loan Funds 30.49 30.49
Unsecured Loans 234.8 1464.8
  8794.98 2888.64
Application of Funds    
Fixed Assets    
Gross Block 2173.91 2173.91
less: Depn 1158.13 1158.13
Net Block 1015.78 1015.78
Capital Work In Progress 365.32 365.32
  1381.1 1381.1
Investments 618.64 618.64
Deferred Tax Assets (net) 118.75 118.75
Current Assets, Loans and Advances    
Sundry Debtors 2651.36 2161.36
Cash and bank 5312.62 272.62
Loans and advances 502.22 502.22
Other current assets    
–interest accrued on Fixed Deposits 376.34 0
  8842.54 2936.2
Current Liabilities and provisions    
Liabilities 1669.26 1669.26
Provisions 496.79 496.79
  2166.05 2166.05
Net Current Assets 6676.49 770.15
Total 8794.98 2888.64


Comments are closed.