Raamdeo Agrawal says fraud could be to tune of Rs 7k cr

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Raamdeo Agrawal says fraud could be to tune of Rs 7k cr

Raamdeo Agrawal, Director and Co-founder, Motilal Oswal Securities feels that it is likely that Satyam’s cost of operations would have been significantly higher in the last five-six years. Most important thing is to save clients interest now and government should do everything to protect investor interest, he added.

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Excerpts from Closing Bell on CNBC-TV18 Watch the full show » ALSO READ See what other experts are saying about markets See what FIIs are saying about the markets See what Udayan Mukherjee is saying about the markets Mahindra Satyam BSE | NSE 25/05/12 Are Mutual Funds betting on Mahindra Satyam?

Raamdeo Agrawal, Director and Co-founder, Motilal Oswal Securities feels that it is likely that Satyam 's cost of operations would have been significantly higher in the last five-six years. He said that there would have been a gap in operating margins. 

"If you do the numbers the total gross overstatement of profitability or reserved numbers is about Rs 7,000 crore, that's what they have admitted in the four items if they are added up."

Here is a verbatim transcript of the exclusive interview with Raamdeo Agrawal on CNBC-TV18. Also watch the accompanying video.

Q: Satyam was talking about operating margins of just 3% what do you think was happening, as to what has been reported on the press release?

A:  If you do the numbers the total gross overstatement of profitability or reserved numbers is about Rs 7,000 crore, that's what they have admitted in the four items if they are added up. The balance sheet is inflated, the P&L and share holders net worth is inflated by Rs 7,000 crore. It means that in last four to seven years, the company has not made any net profits, all [earlier reported numbers] are spooked-up numbers. The cost of entire operation or the realizations which you have and I am sure the per hour realization where you have the gaps between 10-15% gaps as to what Satyam would have realized and what Infosys would be realized and the cost of operations for Satyam would be significantly higher than that of Infosys' of the world. So, there would be a clear gap in the operating margins, so when the numbers were cooked you were not able to figure out how much discount to give to Satyam's numbers but 3% clearly is absolutely shocking.

I was asking my analysts, out of USD 2 billion, more than USD 1 billion is offshore revenue which has about 40-45% kind of an EBDITA margins. There is some kind of meat in the business and what is most important today is instead of trying to figure out how much is the fraud etc, the most important thing is to really save the client's interest right now and the government should do anything to see that the client's interest is taken care of and above all that is the most important thing right now.