Mahindra Satyam restates accounts, feeble hope

Shareholders of Mahindra Satyam may be in for bit of a shock come September 29, when the company restates its accounts. That's the word from foreign brokerages like Citigroup and CLSA, reports CNBC-TV18’s Sunita Nagpal and Isha Dalal.
Over 20 months after the scam came to light, shareholders of erstwhile Satyam Computers, now called Mahindra Satyam, may get some insight into just how deep the rabbit hole goes. On September 29, Mahindra Satyam will restate its accounts for the last two years. But foreign brokerages Citigroup and CLSA say this insight will be slight.Both borkerages say that since the numbers announced will be for FY09 and FY10, it will not be a true reflection of company's current run rate. And putting their money where their mouth is, both these brokerages have given the stock a "sell" rating. The observation that Satyam has seen client exits, project ramp-downs and high attrition through much of FY10, and the fact that the company's market cap is higher than what it was in the days preceding former CEO Ramalinga Raju's confession, have weighed on this decision.
Both brokerages expect FY10 revenues to stand between one and USD 1.1 billion, with EBIDTA margins of not more than 13%.
While they expect to see some improvement margins and revenues in the current fiscal, CLSA expects that the Satyam-Tech Mahindra merger, which should be complete by March 2011, could be negative for minority shareholders.
Their forecasts for FY12 are also quite muted, with Citigroup putting revenues at USD 1.3 billion, and margins at less than 20%. And, CLSA expecting a slightly larger revenue flow of USD 1.4 billion.
So clearly, the general view is that retail investors would do well to move to peer companies like Mphasis and HCL Tech.