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Satyam Will Draw Ugly Headlines for Weeks
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Satyam Will Draw Ugly Headlines for Weeks
Nilesh Jasani and Arya Sen, research analysts for Credit Suisse in the paper, "The Satyam episode will make it more difficult for companies to keep hiding any losses. While we hope no other company has a situation similar to that of Satyam, we are more convinced than ever before that a lot of one-off losses (some booked in the balance sheet) are going to come out in the upcoming two reporting seasons."
The analysts said they are afraid that most of these losses will be reported only in the balance sheets. "There are no real ways of forecasting the one-offs. While analyst forecasts of operating profits will also keep coming down, the market should be less concerned about these largely expected downgrades."
They said if Satyam turns out to be an isolated incident, it will be forgotten by the investors after a few weeks without any medium-term de-rating prospects for the market or investor flow damage. " While we will only know over time the right answers to questions, investors should guard against risks. Many companies/groups, particularly those from the mid-segment, suspected of hidden losses are likely to struggle obtaining capital at the appropriate cost and in retaining normalcy in the regular businesses."
Jasani and Sen said that as other Satyam stakeholders including auditors, minority shareholders and regulators make counter claims on what may have happened, many sentiment sapping, ugly headlines are possible in the coming weeks.
They said Satyam has changed the near term outlook in stock markets. The upcoming result season, policy announcements and politics may permit the market to move beyond the Satyam episode. "This is not the time to panic," said Jasani and Sen. "Long term investors should continue to prefer companies with good corporate governance records."
Source:
http://www.cxotoday.com/India/News/Satyam_Will_Draw_Ugly_Headlines_for_Weeks_Cre
