...Satyamâs operating profit margins, too, were the lowest among the top firms. But Wednesdayâs revelation that margins are actually at 3% and not the reported level of over 20% is a complete shocker. Even the smallest of IT firms have better margins in India and Satyam boasts of much larger clientele and would certainly bill these clients at higher rates compared to tier-II and tier-III firms. The assertion that the companyâs cost structure is disproportionately large too doesnât make sense. Firms such as HCL Technologies Ltdthat have a comparable size have an operating margin of 20% or more. An IT analyst with a domestic firm is in complete disbelief about the statement that the company has a profit margin of 3%.
This statement about low operating margin doesnât quite seem to add up. Perhaps Raju is lying againâif he has been doing it for so many years, thereâs no reason why we should accept his entire confessional statement as gospel truth. There is much more clarity that is needed, but meanwhile one of the theories thatâs doing the rounds of the market is that Satyam indeed generated significant cash, which has been siphoned off to fund the promoterâs other business interests. Instead of disclosing this, Raju now says the cash was never there. Thereâs certainly much more to the Satyam saga that will unravel in the days to come.
