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Defination of financial stress:

A condition where a company cannot meet or has difficulty paying off its financial obligations to its creditors. The chance of financial distress increases when a firm has high fixed costs, illiquid assets, or revenues that are sensitive to economic downturns.

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NEW DELHI The Indian outsourcing company Satyam was struggling on Thursday to determine the

extent of a financial fraud that left it fighting for survival as investors began to search for ways to recoup their losses. "We have launched a process to ascertain Satyam's financial condition, particularly its liquidity position," the interim chief executive, Ram Mynampati, said. On Wednesday, Satyam's chairman, B. Ramalinga Raju, admitted to overstating profits as well as overstating the amount of money owed to the company. Mynampati said Satyam was working to find enough cash, including money owed from customers, to pay its employees, suppliers and creditors. Satyam's "liquidity is not very encouraging at this point," he said. Analysts at First Global Securities, a brokerage firm, said in a report that Satyam did not have enough money to pay salaries at the end of the month. "With Satyam's operations failing to generate the required amount of cash, we believe that it will be impossible for the company to continue its operations," the report said. While the company's founder may have admitted to the largest corporate fraud in Indian history when he said he made up $1 billion out of thin air, Satyam's auditor, PricewaterhouseCoopers, could pay the price. Investors are expected to go to court to recoup some of the billions of dollars in lost equity. Most are expected to go after Satyam's auditor rather than the company. "Pricewaterhouse has signed the balance sheets, and so they are responsible if there has been a falsification," said Ravi Nath, a lawyer with the Rajinder Narain law firm in New Delhi. The firm has been contacted by several investors intending to sue the auditor. "If you're an auditing company and your client says they have $1 billion in cash, you do check with the bank," said Hugh Young, the head of equities for Aberdeen Asset Management, which was a Satyam investor until it sold its holdings as problems came to light. Nath said that while auditors were dependent on information from a company's management, "they do have to verify that information." Pricewaterhouse audited Satyam, which is based in Hyderabad, for at least eight years and signed off on its filings with securities regulators in the United States, Europe and India. The company has drawn criticism from Indian officials. "We will soon take coordinated action in the strictest possible manner against erring company officials and auditors," P. C. Gupta, India's corporate affairs minister, said in a televised interview. Pricewaterhouse said Thursday that it had applied appropriate accounting standards to Satyam's books and would cooperate with regulators.

Price Waterhouse, which merged with Coopers & Lybrand in 1998 to form PricewaterhouseCoopers, has been doing business in India for more than 100 years. It is the only major accounting firm that does business under its name. Foreign auditors are barred from signing off on balance sheets of Indian companies by an act passed in 1949, but Pricewaterhouse's presence predates that act. On Thursday, at a news conference, Mynampati said Satyam had not yet talked with Pricewaterhouse about why it might not have caught the financial misstatements. Taking the accounting firm to court may be investors' only chance to recoup losses. Satyam, which serves as the back office for hundreds of corporations, providing services like billing and technology support, is virtually out of cash and is expected to be sold, whole or in parts. The company's physical assets, like computer networks and desks, are tied to the companies that Satyam serves and would be worth little on the open market. And its work force of more than 50,000 could scatter. Mynampati said Satyam would engage a new investment bank to explore the possibility of a sale or merger of all or part of the company. The company engaged the investment bank Merrill Lynch in December to advise it on "strategic options," but Merrill Lynch terminated its relationship with the company a day before Raju's revelations. Accounting firms can take the hit when their clients falsify numbers most notably, Arthur Andersen imploded after its involvement with the energy company Enron. The firm was convicted by a jury in Texas for its involvement in the fraud. That conviction was overturned years later, but Arthur Andersen was forced to close as it lost clients. Enron and other financial frauds relied on dizzying arrays of off-balance-sheet partnerships and complicated circular trades with willing outside institutions to deceive investors. But the Satyam fraud was absurdly simple: The company said it had about $1.1 billion in cash and bank balances. But, in fact, it had less than $100 million. At the news conference, Mynampati sought to reassure investors and customers that the business would continue. "You can rest assured that our only aim at this time is to ensure the business continues uninterrupted and the challenges if any are minimized or neutralized," he said. Satyam has reached out to its customers, he said, particularly its 100 largest ones, from which Satyam derives 80 percent of its revenue, to assure them of its ability to continue providing critical services. Mynampati confirmed reports that in addition to Raju, Satyam's chief financial officer, Srinivas Vadlamani, had submitted his resignation, although the board had not yet accepted it.

Mynampati, who was president of Satyam's commercial and health care business before being named interim chief, is one of only three directors who has not resigned. He said that he and other directors had relied on the assurances made by the auditor in assessing the company and that he had no personal knowledge of the problems before Raju's letter to the board on Wednesday, acknowledging the fraud. He said the company did not know the whereabouts of Raju, but that it assumed he was still in Hyderabad. Throughout the news conference, Mynampati asked Satyam's investors "to be patient" and said he was sure the company would soon be able to provide enough information to reassure them that it would be able to survive.

NEW article Few days back , satyam announced that it had cash balance of $1.6 billion dollars and tried to merge with maytas by giving cash of 1.3 billion dollars. Suddenly now Mr.Raju claims that satyam bank balance was a accounting fraud which is not believable for 2 reasons: Reason as why Raju want to merge with MAYTAS infrastructure is because because maytas is under financial stress and it needs a cash which Satyam computers has it so they tried to merge the two companys which did not work out. Since the above scenario did not work out probably Raju might has transferred all money to his son/relatives or proxis in the form of payments in the past 3 weeks (remember they postponed board meeting too ...) and now claims that it was a accouting fraud which is easier to make people believe. My gut feeling is they looted the money and now claiming it is a accounting fraud. Lot's of politicians (TDP, Congress, BJP) topmost guns have stakes in MAYTAS, so probably it was kind of match fixing. Government should investigate all transactions including maytas directors , satyam directors and satyam relatives from past one year to find out if shady transactions have occured. I SUSPECT A BIGGER SCAM TOOK PLACE WITH THE HELP OF POLITICIANS. I did not understand whey Raju has to openly admit there was accounting fraud when nobody has raised questions on satyam's accounting or balances. The guilt admission is only to divert the bigger scam i believe. New article Satyam computers is a major IT company in India with more than 50,000 employees currently working in it. Satyam is a leading global business and information technology

company, delivering consulting, systems integration, and outsourcing solutions to clients in over 20 industries. The company came to the Limelight aftes the companys chairman, Ramalinga Raju, resigned last week after admitting to years of accounting malpractices. The whole thing was disclosed by the companys chairman in front of media that he committed the huge fraud of Rs.7,800 crores. Its really strange as he himself seemed responsible for all this and now 53,000 staff members are tensed about their future. The World Bank has also taken some major actions against Satyam. Here is a video for it. The Government of India is desprately trying to help Satyam computers re-establish by financial aid and 3 new directors have also been appointed. They are: Mr. Deepak S. Parekh, Chairman of HDFC Mr. Kiran Karnik, former President of NASSCOM Mr. C. Achuthan, Director at the National Stock Exchange, former Member of SEBI, and former Chairman of Securities Appellate Tribunal. The initial investigations by the Registrar of Companies (RoC) into the Satyam scam has revealed large-scale selling of the companys shares by institutional investors just days ahead of Ramalinga Rajus startling confession of sexed-up company accounts. Highly placed official sources said that the Serious Fraud Investigation Office (SFIO) instituted to probe the scam would closely scrutinize some of these transactions since they have raised the suspicion of possible insider trading. New article: New Delhi/Hyderabad: The Serious Fraud Investigation Office will probe also Maytas infrastructure as part of the Satyam financial scam probe. Corporate affairs minister P C Gupta said on Monday evening that initial investigations suggest a clear nexus between Satyam, Maytas properties and Maytas infrastructure Earlier, the Andhra High Court dismissed Ramalinga Raju's revision petition against his police custody. But SEBI still did not get to question Raju on Monday as a court order on the body's petition to question him was postponed till January 22. Meanwhile the CID is questioning the Raju brothers and former Satyam CFO Vadlamani Srinivas .

They are also looking into their e-mails and phone records over the last one month. Meanwhile, Andhra chief minister Y S R Reddy reiterated his government did not flout any rule in awarding the Hyderabad metro rail project to Maytas. But how deep and how wide is the rot inside India's fourth largest software company? Sources tell CNN-IBN the company is facing serious money crunch, and needs Rs 1,110 crore to tide over the crisis and Rs 500 crore to pay the January salary to employees. Meanwhile a search is also on for a new CEO for the embattled IT firm. Network-18 learns that the board is looking at a 10-day time period to pick someone to head the company. Over 40 applications have come in so far. There is now also a question mark on the number of employees Satyam has. It is reported that Satyam has 53,000 employees. How they did it Investigators are now reportedly coming across evidence of insider trading by the promoters even before the scandal broke. The big takeaway from the Registrar of Companies report is that the top management of Satyam - the directors and senior officials - sold shares ahead of the Big Bang revelation by Raju. The reports say Satyam books have been overstated by Rs 5,000 to Rs 6,000 crore, leading to an inflated stock price that helped the top management make money. Who sold what? Raju has claimed that no one else in the company was privy to the fudging of accounts. But exclusive information with CNN-IBN suggests insider trading. BSE figures show a number of senior people in the company, including Raju and CFO Vadlamani were reportedly selling Satyam's shares over the last 22 quarters. In June 2001, Raju had nearly 23 per cent shares. By December that year, his share was down to 22.4 per cent. In September 2002, it fell to 21.6 per cent which fell a year later to just over 19 per cent. In 2004, Raju's holding was 16 per cent which fell to 14 per cent in 2005, 11 per cent in 2006. In 2007 it was in single digit. By September 2008 Raju's share was just 8.27 per cent.

BSE figure also show Vadlamani sold 92,538 shares while the then CEO Ram Mynampati sold 700,000 shares plus 2,50,000 ADRs. Apart from these, other senior officials also reportedly sold large number of shares. Sources say they include one Kiran Cavale who reportedly sold 400,000 shares and 10,000 ADRs and one Rajan Nagarajan who reportedly sold 430,000 shares and 70,000 ADRs. (Inputs from Shaik Ahmed Ali and Karma Paljor) (Follow IBNLive.com on Facebook and on Twitter for updates that you can share with your friends.)
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