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Karnik sees no merit in ICAI poser on Satyam stake sale timing
April, 17th 2009

The Satyam Chairman, Mr Kiran Karnik, has told Business Line that he is really surprised and shocked at the remarks made by the ICAI President, Mr Uttam Prakash Agarwal. On Wednesday Mr Agarwal had cautioned small investors they should be careful with their investment decisions on Satyam as a strategic investor was being roped into scam-hit company even before its accounts were restated and a correct picture of its financial position ascertained.

Mr Agarwal had said that he was disappointed as the importance of accounting was not being recognised by those involved in the stake sale process.

While announcing that Tech Mahindra had emerged as the highest bidder in the stake sale process, Mr Deepak Parekh, Satyam Board member, had on Monday said that Satyams accounts were still in the process of restatement and that it would take a few months longer.

Mr Karnik said Everyone knows restatement of the financials is going to take a long time. Although we do not have a deadline, we know the restatement will not happen immediately. So if their (ICAIs) recommendation is to wait for restatement, there may be nothing left to sell.

Warning issued

Mr Agarwal had said, My grievance, as ICAI President, is they are ignoring the importance of accounting. How can one take such a big decision involving more than Rs 2,000 crore before restatement of accounts. In the absence of the true and correct picture of the financial position, the stake sale is being done and management control is being passed over. I am talking only from the point of view of ICAI President and the fact that importance of accounting should be recognised. A small investor has to be cautious in such situation.

He warned that small investors should not be taken in by the Rs 58 a share that Tech Mahindra (top bidder) was paying towards acquiring controlling stake in the company.

My view is that small investors are not equipped to take a reasonably good investment decision when the financial statements have not been restated. So far after the scam, no Indian chartered accountancy firm has signed any restated accounts of Satyam. My worry is tomorrow investors may end up putting the blame on CAs if anything goes wrong with their judgement on the valuation, he told Business Line.

Mr Agarwal, however, declined to be drawn into a discussion on the commercial aspect of salvaging the scam-hit company and the implications of waiting for the restatement of accounts to be completed before a strategic investor is inducted.

The ICAI President said he plans to discuss this matter at the council meeting slated later this week.

Refuting comments

Meanwhile, when contacted, a spokesperson for Tech Mahindra declined to comment citing the silent period that the company observes before the announcement of the fourth quarter numbers.

However, sources in the company refuted the ICAI Presidents comments, adding that the stake sale decision was done at the behest of the Government.

While it is true that we may not have access to precise financial information pertaining to the company, we have taken a judgmental call based on our estimation and understanding of the financial details shared with us.

Another source said, Lets not forget that Tech Mahindra managed to acquire the company at one-tenth of the price at which the company was trading about a year and half ago. I am pretty sure that other bidders would have been willing to pay up to Rs 80 a share if the bidding were to go into the second round.

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