Satyam Aims To Continue Business, Protect Staff

HYDERABAD: The interim managers of tainted Satyam Computer on Thursday said they were talking to clients to continue serving them, even as the Chief Financial Officer Valdamani Srinivas quit abruptly.
Interim CEO Ram Mynampati declared that the liquidity and cash-in-hand were not encouraging, although the company managed to pay December'08 salaries to its 53,000 employees.

"Some outstanding payment to vendors is yet to be made... we are verifying the liquidity and balancesheet... we have to raise liquidity in near term and are confident of raising it," said Mynampati, while adding that his appointment was legal.

On the conduct of auditor PriceWaterhouseCoopers, he said: "We have not verified what process PwC took to certify financial statements. We are not yet in touch with them."

On the financial irregularities disclosed by former Satyam Chairman Ramalinga Raju, Mynampati said the team was not yet in a position to answer these issues, as it is still ascertaining disclosures made by Ramalinga Raju and trying to correct financial irregularities.

He said the regulatory bodies have already started their inspection and a team of market regulator SEBI was in Satyam talking to associates.

CFO Srinivas, who Mynampati said was expected in office within a week, sent in his resignation during the course of the press conference — dealing a blow to efforts to hold the top leadership team intact.

The board will decide on accepting his resignation at a meeting on January 10.

Satyam Computer Services is speaking to its top 100 clients individually, and has received expressions of support from key customers, its interim CEO said.

"Our only aim at this time is to ensure that the business continues," Mynampati told reporters at a news conference.

Another top priority for the company was to protect employees' careers, said Mynampati.

He said the company would help investigating agencies and had launched a process to assess its financial position.

The Satyam board relied on audited data on revenue and had no inkling about the fraud, said Satyam interim CEO Ram Mynampati.

The company is in the process of identifying new candidates for the board, said Mynampati.

Mynampati said that the aim was to ensure complete transparency and smooth transition of the leadership.

Coming up Election Battle

Raju resigns, admits fraud, Satyam books cooked up

Satyam Computers founder and chairman Ramalinga Raju had resigned from the Satyam board.



Raju has written a letter to the board giving details of the balance sheet. Balance Sheet has inflated cash balances of Rs 5040 crore and accrued interest of Rs 376 crore is non-existent. Rs 1230 crore was arranged to Satyam and is not reflected in the books

While Ram Myanpati will act as Interim CEO, Merrill Lynch can be entrusted to explore.

As per the revelations, second Quarter numbers were inflated to Rs 2700 crore vs Rs 2112 crore actual numbers. No board member had any knowledge of the real situation of the books.

Shares in Satyam Computer shed all gains to turn negative after the embattled Indian outsourcer said its chairman has resigned from the board. Shares were down 16.81 percent at 149 rupees. (11.22 a.m.)

Incidentally, a Satyam board meeting is scheduled for December 29. According to analysts, Raju's resignation wouldn't make much of a difference to investors. "He is not to be blamed alone...the responsibility lies with the entire board. It was a unanimous decision and this board is in no place to decide on the issue," said Prabhudas Leeladhar analyst Apurva Shah.

Satyam fraud clouds corporate governance of India Inc

Chairman B. Ramalinga Raju’s admission that Satyam Computer Services Ltd’s Balance Sheet was completely fabricated got the stock
crashing down by 66.5 per cent to Rs 60 from Wednesday’s high of Rs 188.70. .
The share hit a low of Rs 58, as details of the extent of fraud perpetrated by the promoters shook the stock market and cast a grim cloud over the corporate practices of companies.

The BSE Sensex crashed 470.23 points or 4.55 per cent to 9,865.70, after rising to a high of 10,469.72 earlier Wednesday. Investors aggressively cut their positions. The BSE IT Index plunged 7.70 per cent and BSE Realty tumbled 11.20 per cent.
IT and other sectoral stocks were beaten down badly as the Satyam fraud raised question over corporate governance of other companies also, especially IT.

“The sectors which have done extraordinary well in a very short span of time such as IT and realty attracted distrust as Satyam's case has made investors uncomfortable about these companies,” said Kapil Shah, analyst with DBM Wealth Management.

The Satyam fiasco has left a big question mark on corporate governance in India while sending a negative signal to the foreign institutional investors, analysts said.

Manish Sonthalia, VP – equity strategy, Motilal Oswal, said, “It is shocking! It has maligned India’s image before the FIIs. In view of the current event, a lot of new regulations are expected in the near term by the regulators. Balance Sheets will be scrutinized meticulously.”

The Satyam story poses a big question over the credibility of auditors in general, as PricewaterhouseCoopers was auditor of the company. The bankers to Satyam included Bank of Baroda, BNP Paribas, ICICI, HDFC, Citi Bank, HSBC.

Anita Gandhi, head-institutional business, Arihant Capital, said, “The Indian technology industry was a very important driver for the country's stock market for nearly a decade. Satyam's fraud is expected to lead a severe blow to the entire industry with investors being more cautious going ahead. This raises serious questions on the entire due diligence process conducted by the auditors of Satyam. What is more surprising is the chairman's confession after his resignation. This means, all along, he did have vested interest in keeping the investors in darkness.”

Raju’s letter to the company board revealed a fraud of unprecedented proportions. He states that Satyam’s balance sheet as on Sep 30, 2008, carries an inflated (non-existent) cash and bank balances of Rs 5,040 crore (as against Rs 5,361 reflected in the books).

Further, it carries an accrued interest of Rs 376 crore which is non-existent. The books carry an understated liability of Rs 1,230 crore on account of funds arranged by Raju, and an over stated debtors position of Rs 490 crore (as against Rs 2,651 crore in the books).
For the second quarter ended Sep 30, 2008, Satyam reported a revenue of Rs 2,700 crore and an operating margin of Rs 649 crore (24% of
revenues) as against the actual revenues of Rs 2,112 crore and an actual operating margin of Rs 61 crore (3% of revenues). This has resulted in artificial cash and bank balances going up by Rs 588 crore in the second quarter alone.

Ankit Sinha, CEO-Spark Advisory, said, “The sentimental impact that was seen across the board was but obvious as the Chairman of Satyam which was one of the reputed company revealed the horrifying internal facts. There are also rumours that the October quarter profit shown by Satyam was inflated. There may not be much impact on the other IT companies and one may see Infosys or TCS go up in next trading sessions. However, if IT companies lower their guidance for the current quarter one may see their stocks plunging in near term.”

Amitabh Chakraborty, President – Equity, Religare, said, “Investors now need to pursue due diligence before investing in a company. Take a careful look at the cash position in the balance sheet. Enquire with the bankers.”