Death knell for PRICE WATERHOUSE?

IIPM set to beat economic slowdown

The Satyam debacle and the spectacular failure of Price Waterhouse to detect the scam has many worried in India Inc. After all, the audit firm is considered to be one of the global Big Four and is the auditor for 46 out of the BSE 500 firms. Some of the well known companies whose accounts are audited by Price Waterhouse are Moser Baer, Max India, Maruti Suzuki, NDTV, HCL Technologies, United Breweries, NIIT, TV Today, Marico, Kesoram Industries and GMR Infrastructure to name just a few. Big time names like Vijay Mallya, Kumarmanglam Birla, Deepak Puri, Pronnoy Roy and Shiv Nadar could face embarrassment because Price Waterhouse audits their firms and everything about the firm is now under suspicion.

Take just one example of GMR Infrastructure to see how otherwise normal entries on books start looking suspicious. In the quarter ending June, 2008, GMR reported a revenue of Rs.885 crore. In the same period, it reported ‘General and Administrative Expenses’ of Rs.71 crore and fuel consumption of Rs.384 crore. In the next quarter ending September, 2008, revenues declined marginally by about Rs.40 crore to Rs.846 crore. And yet, admin expenses went up by Rs.9 crore and fuel consumption declined by a whopping Rs.111 crore. It does appear suspicious, doesn’t it? Incidentally, the former Cabinet Secretary of India (no less) T. R. Prasad has resigned from the board of GMR after he was de facto sacked from the Satyam board. There are credible reports that Prasad is likely to be questioned as investigators unravel the scam. Who knows what skeletons will tumble out then? But one thing is for sure: his future as an ‘independent’ director is as dead as a dodo.

Yet another individual whose career as an entrepreneur might turn out to be short lived because of the scam is Teja Raju, the son of Ramalinga Raju who runs Maytas. Like Satyam, Maytas (Satyam spelt backwards) has seen a meteoric rise and has bagged projects in excess of Rs.10,000 crore in a short span of time. That includes the prestigious Hyderabad Metro project. But there are clear indications that Maytas is inextricably linked with the Satyam scam and it does appear to be a matter of time before Maytas also unravels, as fresh skeletons are dug out by investigators.

But the most telling taint has fallen undoubtedly on Price Waterhouse whose future looks to be in peril. Of course, add the name of the guru and master of good ‘corporate governance’ and Harvard professor Krishna Palepu who earned about Rs.3 crore as an independent director and ‘consultant’ in governance to Satyam. Talk about delicious ironies!

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Source : IIPM Editorial, 2009

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

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