Indian Markets: Painful Start to 2009

Includes: GAILF, SAY
by: Equitymaster

Picking up the ruins
As the interim CEO of Satyam (SAY), Ram Mynampati has the unenviable task of salvaging the beleaguered company. He has pointed at a strong receivable position from its customers, fixed assets and customer support but has not made any statement regarding the fictitious funds.

He has also begun the damage control exercise by addressing Satyam’s employees. In a letter to the employees, he said, "This is as good a time, as any, to remind ourselves that we have been acknowledged as being amongst the top three Best Employers in India by Hewitt and Mercer in independent surveys in 2007." At a time when there are question marks over hard numbers like cash and bank balances audited by world renowned firms, we wonder how seriously one should take such seals of approval.

Mr. Mynampati also says, "We shall soon be a successful case study of how organizations have turned over a new leaf." Time will be the judge of that, but it is sad such a situation has arisen in the first place. If only financial conscience keepers did their basic job properly.

India’s oil crisis
Employees of public sector oil companies have recently gone on a strike demanding higher wages. As per a leading business daily, these white collar employees have the moral backing of the senior management who also stand to benefit from a wage hike.

Indian Oil’s Koyali, Panipat, Mathura and Haldia facilities have been affected as a result of the strike. GAIL (OTC:GAILF) has also been forced to cut back natural gas supplies by 47 m cubic meters per day.

The oil companies have stocks of refined products that could last up to 19 days. If the strike extends beyond that, the government will turn towards the private players. However, it will still throw the entire fuel dynamics of the country into disarray. In fact, the government has asked the companies to sack nearly 70 executives in the forefront of the agitation.

It is indeed tragic that PSU oil companies, especially the marketing companies, have to go through one headache after the other - pricing controls, crude price shocks and employee agitations. Very few industries, barring the airlines, have such a tough time on a regular basis!