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When Mr Vineet Nayyar, Chairman of Mahindra Satyam, announced the results of the first two quarters of 2010-11 on November 15, 2010, the scam-hit company had become ‘current' with its accounts conforming to the Indian accounting standards.
It still has at its disposal about Rs 2,000 crore of the Rs 2,890 crore infused by the Mahindras.
This, however, doesn't mean that all is well for the company. Uncertainty over pending legal issues in India and a host of class action suits in the US persist. Though it said it had no liability with regard to the Rs 1,250 crore ‘adjusted' by Mr Ramalinga Raju, the claims made by Maytas firms is a concern too.
I-T Dept not satisfied
The Income-Tax Department is not satisfied with the numbers. It had served Section 142 (2A) of the I-T Act and called for re-audit of the restated numbers. This would result in a special audit of the accounts by an auditor empanelled by I-T Department. Any adverse findings could hamper the growth prospects.
The EBITDA (earnings before interest, taxes, depreciation, and amortization) margin, a key parameter of a company's financial performance, is already under strain in the second quarter with pay hikes resulting in a burden of Rs 913 crore as against Rs 867 crore in the preceding quarter.
These developments are a cause of concern for the small investors. Already hit hard by the Satyam fraud, they are now worried that their interests could be compromised if the company decides to go ahead with the merger with Tech Mahindra.
Their worry is that the legal issues and other glitches could seriously impact the valuation.
A group of small investors had vociferously raised these concerns at the Annual General Meeting recently. (The new management had taken permission from the Company Law Board to put off the AGM till it could complete restatement.)
Employees' mood
The general mood of employees too is not euphoric. Reports of ‘rightsizing' the staff after the merger, have put them in a spot. Attrition is very high at 25 per cent in the last two years.
A top executive of the company confided that these are the glitches that forced the Mahindras to go on a low gear with regard to the merger.
There, however, is a silver lining. Mahindras must have factored-in these bumps on the road.
As it negotiated this difficult road, it is also in the process of completing the huge special economic zone just behind its Madhapur headquarters, which would help it move most of its work before the sops for the IT industry go.
Mr Nayyar and Mr C.P, Gurnani, Chief Executive Officer, said they were able to convince the customers to believe in the Satyam story.
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