Beyond Equity :Tata Motors FD offers 13.5% p.a. return

tatalogo The good old FD’s are back in Flavor. With Investor’s losing their invested capital in the stock markets last year, more and more people are realizing that it is better to park money in avenues that may provide low returns but provide safety to their Capital. Gauging the mood, more and more companies are offering Fixed deposits to investors.

Tata Group company and Automobile major, Tata Motors has invited deposits from general public at attractive interest rates.

Following are the details of the Fixed Deposit Schemes:



    •   Minimum Deposit of Rs. 20,000
    •   Additional deposit in multiples of Rs.10,000
    •   Recurring Deposit plan for employees
    •   Additional 0.5% interest for Senior Citizens, Shareholders and  
    •   Employees of the company

  Who Should Apply ?

    • Investors who are looking for safety of capital and are comfortable with moderate returns on the invested capital can opt for the FD. It would be advisable to buy one Share of Tata Motors to get the additional 0.5% interest. However one should opt for a 3 Year time frame as it offers the maximum benefit and effective yield of 13.5%.  

One should remember that Interest earned on Fixed deposit is taxable and hence the actual post tax yield varies from person to person depending on the tax bracket. This means that a person who does not fall into the highest tax bracket of 30% would benefit more from this scheme as the net tax outgo on the interest income would be lesser.


Why is Tata Motors raising money through deposits ?

Tata Motors is facing a liquidity crunch. The company needs money to refinance the $3 Million Debt it had raised for acquiring the Jaguar Land Rover. The company had also launched Right Issue in November 2008 which saw lukewarm response from the shareholders. The company has approval to raise Rs. 1930 crore through deposits from public.

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Rolta India Stock falls prey to rumours

Call it the Satyam Phobia ! The Shares of Rolta India, an IT Company nosedived by almost 60% on rumours that the stocks pledged by promoters have been sold by creditors. Speculations were rife that some foreign funds have sold stake in the software firm.

The company’s stock plummeted to 3 Year low of Rs. 42.40 after this rumour. However, after the clarification from the company that the business and operations are in order, the stock bounced back to Rs. 87 down 17% from yesterday’s close.

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Satyam Computers –The Fallout of Scam

satyam Mr. Ramalinga Raju may feel relieved after removing the burden of fraud he was carrying on his conscience after he sent a shocking statement of his confession of Intentional misstatement of Company’s Financials, he has put a whole lot of Investing Community worried on the state of affairs. 

Following are the equations that emerged out of today’s sensational revelation-

  • Major Institution Investors have exited out of the company. Some like Fidelity were lucky enough to exit at good price.


    • Aberdeen International sold 3.6 crore shares (5.3%) at Rs 42.6 per share and exits completely from Satyam computers


    • Swiss Finance, 100% sub of UBS AG sold 1.37 crore shares at Rs 80 per share and exit Satyam


    • Fidelity Investment sold 40 lac shares at Rs 108.96 per share.


    • Morgan Stanley sold 47.7 lac shares at Rs 68.68 per share.


  • Satyam’s ADR was quoting at 0.85 Cents in Pre-market quotes down by 91% from previous close of 9.35 dollars. The trading of Satyam ADR has been suspended.


  • Satyam Fraud has left a deep scar on the corporate governance practices in India. It would definitely put brakes on FII Investments in Mid segment companies where the quality and transparency of management still needs to be pulled up.


  • Investment Guru expect the Mid cap stocks to continue to bear the burnt of Satyam fraud in the coming days as these stocks get discounted for the higher risk of corporate governance issues.


  • With the exposed financials, the company is left with just 360 crore of cash in its balances sheet. This is going to start a series of cash crunch activities within the organization. The company may find it difficult even to pay salary to its staff. The 50K plus employees of the company must be under tremendous stress and sense of uncertainty. The company may witness large scale drain of its human resource to rival firms.


  • Satyam Computers may also see exodus of its clients as they move to other companies post the fraud.


  • The Auditors of Satyam Computers, Price Water House Coopers (PWC) will be under scrutiny for failure to detect the irregularities in the financials which was allegedly being carried out for last several years. Questions are being raised on auditors knowledge of the ongoing fraud in the company.


  • The National Stock Exchange (NSE) has removed Satyam Computer Services from the Nifty Index with effect from January 12, 2009. Satyam, the NSE said, will be replaced by Reliance Capital


  • The Survival of Satyam looks bleak. It will be difficult for the company to find buyers with virtually no assets on its balance sheet. The stock price tomorrow may be end up in single digit. This may signify collapse of  Satyam Computers. It would be interesting to see how the government intervenes to save the future of thousands of satyam employees and the image of corporate India.


There are still questions looming large on the whole Satyam story and Raju’s confession.

  • Mr. Raju’s statement that only he was aware of the ongoing fraud and no body else in the board was aware of it looks like a blatant lie.


  • His statement that he did not personally benefitted from the whole misstatement and it was done just to save satyam  from takeover threat and loss of customers does not get down the throat.


  • IL&FS sold 2.45 crore shares of satyam in last 15 days. This raises question on violation of Insider Trading norms as it looks that the company had some indications of the impeding danger.


  • The world bank had banned Satyam for 8 years on charges of spying on Bank’s systems. This gave a hint that something was wrong at the helm of affairs of the company.


  • Around 3000 employees of the company posted their resumes on the Job portals. This shows that the employees had a hint of wrong doings happening at Satyam and were concerned of its future.

There may be some more stunning revelations as the regulators start investigation into the scam and unearth the whole story. Meanwhile it is high time that the India Inc. take serious stock of its corporate governance and strengthen it to reinforce the confidence among the Investors.

Some Surprise Moves

Another thing worth watching today was the list of losers in today’s fall. Though the fall was majorly attributed to the Satyam Scam, many companies came under the fire. Is it a Red flag for these companies in terms of corporate governance risks ?


Companies like Suzlon Energy, Unitech, reliance Communications and DLF were among the Top Losers along with Satyam. does this mean that Real Estate companies are being touted as ones that may have Corporate Governance Issues. It may be too early to comment on this, however today’s fall in these stocks have left some food for thought.

Inclusion of Suzlon Energy and Reliance communication to the list is also surprising. As I said above, the Midcap counters may come under pressure on corporate governance perception of these companies or cross holdings of the promoters of such companies.

However, the satyam debacle resulted in Infosys Scrip gaining 1.63% on hopes of it gaining on account of business lost by Satyam. It can be also termed as reward for good corporate governance image of Infosys.


Hot from the Press

Perhaps Ramalinga Raju is lying again- Live mint

This statement about low operating margin doesn’t quite seem to add up. Perhaps Raju is lying again—if he has been doing it for so many years, there’s no reason why we should accept his entire confessional statement as gospel truth. Read More

Satyam fraud: What should existing investors do now –Economic Times

Investment bank CLSA has said that the value of Satyam stock in current conditions is about Rs 25-30. However, some analysts feel the stock is worthless as the scale of fraud is not yet known.

Satyam employees fear for jobs – Financial Express

Holes exposed in independent directors' roles – Business Standard

Satyam Computers Website

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Financial Fraud at Satyam Computers

Raju admits Falsification of Financials and Assets

This is the biggest shocker for India in terms of Corporate Governance. The shares of Satyam Computers fell 78% in a Single day after the news broke out that Chairman Ramalinga Raju  admitted that the IT major's balance sheet has inflated cash and bank balance of Rs 5,040 crore.

Following is the Text of Reuters Report on the Subject

Satyam Computer Services Ltd. Chairman Ramalinga Raju resigned after saying he falsified accounts and assets, sending shares of the Indian software services provider to a record decline.

Raju, 53, unsuccessfully tried to sell two companies to Satyam last month in a final attempt to plug 50.4 billion rupees ($1.04 billion) of “fictitious assets” on the company’s balance sheet, Hyderabad-based Satyam said in a statement today. Profits from the main business have been inflated “over a period of last several years,” Raju said in a letter to the board.

The transactions started to unravel after shareholders vetoed the sale of two construction companies, four directors quit the company and the World Bank barred Satyam from bidding for contracts. India’s markets regulator C.B. Bhave said the event is of “horrifying magnitude” as Satyam dragged down the benchmark stock index already hit by a record slump last year.

“This is a black day for India, the software sector and corporate governance claims,” Arun Kejriwal, founder of Kejriwal Research & Investment Services, said in Mumbai. “If at all there’s an event that could be the biggest setback for corporate India, it is this.”

Shares of Satyam, which means “truth” in Sanskrit, plunged 69 percent to 55 rupees in Mumbai trading. The Sensitive Index tumbled 4.3 percent.


Of the reported cash and bank balances of 53.61 billion rupees on Sept. 30, 50.4 billion rupees was non-existent, Raju said in the letter sent to the Bombay Stock Exchange.

Operating margin at Satyam, India’s fourth-largest software exporter, in the quarter ended Sept. 30 was 3 percent of revenue, instead of the reported 24 percent, Raju said in the letter. The company’s revenue was 21 billion rupees, 22 percent less than the inflated figure of 27 billion rupees that had been reported.

Raju arranged 12.3 billion rupees “to keep operations going” at Satyam over the last two years by pledging the founders’ shares and raising funds from other sources, he said.

“What started as a marginal gap between actual operating profit and the one reflected in the books of accounts continued to grow over the years,” Raju said. “It was like riding a tiger, not knowing how to get off without being eaten.”

Read full transcript of Raju’s Letter to Board of Directors

Satyam's Balance Sheet       Profit & Loss 

More News Articles on Satyam Fallout

Will act on Satyam after getting details: AP CM

Satyam irregularities referred to serious fraud probe agency

LIC to take decision on Satyam stake soon – MD

Nasscom may ban Satyam from its membership

Credit Suisse suspends coverage of Satyam

SEBI reviewing options on Satyam

Satyam fraud clouds corporate governance of India Inc

Ram Mynampati to be interim Chief Executive Officer

Read More!

Year 2009 : Markets a mix of Fear, Uncertainty, Hope and Confidence

Dear Friends,

My Heartiest wishes for a Happy and Prosperous New year to all of you and your families. Like most of you, I am also looking forward to this year to bring rays of new lights to our lives which will enlighten us towards better investing decision that would lead to  a prosperous future.

Year 2008 was the year of movers and shakers. While the stock markets woke up to a worrisome state of valuations, the year, as it moved ahead turned out to be gloomy with financial turmoil and recession gripping the state of affairs. Globally, the situation worsened and all measures to built in confidence of Investors in the markets proved to be ineffective. We have moved in the New year with the wounds of the past year. But Year 2009 brings in a mix of emotions to the stock markets. Lets see what this year has in store for us.

The Fear Factor 

The Scars of the mayhem of 2008 are still looming on the Investing Community. The Credit Crisis, US Recession, Global Slowdown, Commodity price Crash , Bubble bursting of Real Estate Stocks are not the things of Past. These are the wounds that will be carried in 2009 and would continue to haunt the markets. The L (Liquidity) Factor which laid the foundation of the Historical rise of stock prices in the Year 2007 is missing. Even at current levels Investors are not confident of putting their money into Equity. Why ? That’s the Fear Factor. The Fear that markets may go down deeper as the Global slowdown unfolds itself to emerging economies. The Fear that corporate results in 2009 may not turn out to be good stories. The Fear that globally, the economies may take much longer time to build back the confidence on Investors in the Markets.

It’s Foggy all around

The biggest cause of concern for the common Investor is lack of clarity on how the things will fan out in future. For us it’s important that the Foreign Institutional Investor drive back with Dollars to our country and Invest in our markets. It’s important that our companies remain competent and profitable and continue on the growth path. It’s important that the great Indian Consumption story revives itself. Being the Election Year, it’s important that the country has political stability and the investor perceive the outcome as good for the nation. It’s important that our youth remains employed and wrath of recession do not fall on their jobs. It’s important that not only we, but globally the economies turn around with greater resilience. But when will these things happen is a question mark. The Uncertainty is that when we will come out of this uncertainty !

Hope of Revival

Every night is followed by a day which removes the shadow of darkness and provides a new lease of life. Stock Markets are no exception. It’s not the first time that we are seeing such a meltdown. It has happened in past and if we go by history , we have recovered from these meltdowns.

1992 crash 2000 crash

The History shows that these major crash have taken time to heal and Rebound, but ultimately we did recovered and performed well. The current downtrend may take whole of Year 2009 to consolidate or even the next year, but it has to rebound and hence if you want to reap handsome gains, you would need to invest in the downtrend and wait patiently as the markets settles and unsettles and again settles at the turn of events.

Confident of our abilities

We had braved earlier downtrends and emerged as a stronger economy. We have the ability and stuff to do that again. India has the ability not only to face the current crisis, but it should also show the world the way to get out of the current mess. The world today is looking at countries like India and china to save them from the crisis. The Reason is that the foundation of our growth story is deep rooted and is fundamental in nature as against the ill regulated practices of the developed countries. If we look at the factor that helped India speed up its growth, we will find that these pillars are equally strong. We still have the demographic advantages, we are young, we have huge population which drives our Consumption story, We are committed to develop our Infrastructure, Our companies have proved their mettle, we have huge natural resources and above all we have a positive frame of mind which says that we will manage to emerge as a winner. In my opinion, India and other emerging countries would continue to attract Investment, once we are through this lull period of slowdown.

Outlook for Investors

The Year 2009 will not be a year of surprises. It will be a year in which an Investor would have to show his patience, choose stocks at reasonable valuations and wait for these stocks to perform. The worst may not be behind us, but the year 2009 should end towards a path of gradual recovery.

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