More Concealed Losses Yet To Be Revealed By Indian Companies Says Credit Suisse
Some investment banks have come to the conclusion that the fraud at Satyam is part of a larger issue in corporate India and that the event may serve as a catalyst for a lot of one of losses which will be reported in the upcoming earnings seasons.
Credit Suisse an investment bank has increasingly come to believe that India’s largest corporate fraud will make it more difficult for companies to continue hiding their losses. Many losses have occurred as a direct consequence of both the global economic slowdown and precipitous market corrections, which remain hidden for now, but in the wake of the Satyam scandal, it is unlikely that these losses can be maintained indefinitely.
The report by Credit Suisse says that more than 50 per cent of listed Indian companies are held by major shareholders, or what are known as promoters in India, including the Government of India itself. The investment bank added that the Indian financial system is not completely a mark to market one implying that every correction in valuations does not automatically have to result in accounting losses.
The sheer scale of the 2008 bear market, collapse in valuations and hidden gearing of major shareholders has meant that substantial losses must exist of the kind at Satyam which have not been revealed to investors as of yet.
The perception is that with the end of year accounting period imminent, and the hope of a quick recovery which would eliminate prior losses no longer tenable, many company are likely to reveal their losses in the upcoming earnings season, the investment bank reckons.
Compare India’s Best Insuarance Deals
Comments
Leave a Reply