Indian equities came under tremendous pressure after a shocking confession and resignation by Ramalinga Raju, the chairman of Satyam Computers was sent to the stock exchanges.

 

In a letter to the board of directors, Raju states that Satyam’s balance sheet as on Sep 30, 2008, carries an inflated (non-existent) cash and bank balances of Rs 5,040 crore (as against Rs 5,361 reflected in the books). Further, it carries an accrued interest of Rs 376 crore which is non-existent.

 

For the second quarter ended Sep 30, 2008, the company reported a revenue of Rs 2,700 crore and an operating margin of Rs 649 crore (24% of revenues) as against the actual revenues of Rs 2,112 crore and an actual operating margin of Rs 61 crore (3% of revenues). This has resulted in artificial cash and bank balances going up by Rs 588 crore in the second quarter alone.

 

As the news spread BSE’s Sensex plunged down 224.39 points or 2.17 per cent. National Stock Exchange’s Nifty also came down 74.40 points or 2.39 per cent. BSE Midcap Index was down by 0.84 per cent and BSE Smallcap Index slipped by 0.35 per cent.