There does seem some light at the end of the tunnel after all. Satyam which is currently synonomous to scam, has reportedly got some prestiguous and high budget new orders from clients. In the wake of the current news on Satyam, this seems to be really surprising. The company is learnt to have bagged two new projects.
An internal mail shows Satyam has received a pilot project from the Centre for Railway Information System, which if executed successfully would land it a contract valued at around Rs 2,000 crore. The second project is from Malaysian Airlines which is also said to be worth crores.
“Last week, all the employees were reeling under the spate of bad news. The government intervention has really helped alleviate the gloominess. Bagging of big projects will ensure free flow of funds,” said a person familiar with the development.
The major fear of the Satyam employees and investors slowly seems to be making its presence felt. With the Satyam fiasco questions are being raised over the reliability of the company and major international clients are looking out at other vendors to move their projects too.
Major clients of Satyam Computer Services, such as General Electric (GE), Nestle and British Petroleum, have started exploring alternative options such as moving work to other outsourcing vendors.
GE, the largest client for Satyam, is learnt to be evaluating options of inducting the Satyam team working on its IT project or convincing other IT vendors to merge this team with their resources to ensure continuity of work. A source familiar with the matter said talks are on with other outsourcing vendors. Satyam’s bigger rival Tata Consultancy Services (TCS) already provides services to GE.
Replying to an e-mail questionnaire, a GE spokesman said the company has no comment to offer.
Nestle, the world’s largest food company, has been a Satyam client since 2004. In 2007, it extended its engagement with the Indian IT firm for another three years, landing it a new multi-million dollar contract. The Switzerland-based company says Satyam has guaranteed it normal continuation of services and it also has robust internal resources to provide it necessary IT support.
However, it is not resting assured. “Alternative solutions are being considered and no disruption of Nestlé’s IT operations is expected,” a Nestle spokesman said in an e-mail.
Outsourcing analysts say clients are worried about continuity of their work being handled at Satyam where employees are looking for another job. “Clients are evaluating options as their business continuity is at risk. Other suppliers are also working overtime to poach some of these marquee clients,” sourcing advisory firm Everest principal Nikhil Rajpal said.
With PriceWater Hous Cooper having bungled up big time with the accounts of Satyam, and having failed to realise the Satyam scam of over 7000 crores during their audits is likey to be replaced by an Indian audit firm. The first step by the Government appointed board will hence be to get an auditing firm audit the accounts of Satyam and help restore investor confidence.
The government-appointed new board for Satyam Computer Services has declared that the fraud-hit IT bellwether will have a new audit firm to restate the books of accounts.
Given the investor’s mood against PriceWaterhouse (auditing firm of Satyam) and its rub-off effect on other foreign audit firms operating in India, there is a strong possibility of an Indian firm getting the mandate, said experts.
‘Ninety-nine percent the new mandate will be given to a reputed Indian audit firm,’ RG Rajan, a city based auditor, told media.
‘It is now established that the foreign audit firms are not worthy of shareholders’ trust. The firms are beyond the Indian law. The Satyam board should now appoint only an Indian firm and there are many reputed firms in the country,’ S Gurumurthy, auditor and noted commentator, told reporters.
Agreeing with him, another senior auditor on condition of anonymity told media: ‘Foreign audit firms have commonality of interests. In the present case only a reputed Indian audit firm can infuse investor confidence of the true and fair view of accounts.’
‘It is the domestic industry that should be faulted for the roaring business that the foreign audit firms have here,’ he added.
While auditing textbooks describe an auditor as merely a watchdog and not a bloodhound, Gurumurthy says the new auditors for Satyam will not be the latter.
Categorically saying that he would decline if the assignment is offered to his firm, Gurumurthy said, ‘The new auditor will look at how fictitious assets were created and the mode of approval given. One has to see the roles of individuals - whose role to do what.’
Meanwhile, it will be interesting to note how Satyam removes PriceWaterhouse as per the Company Law an auditor will hold office from the annual general meeting (AGM) to another AGM.
Though it is very clear that Ramalinga Raju had managed to cook the books of Satyam to a figure of Rs. 7,800 crores, the fact remains that the top auditing firm PriceWaterhouse saw no fraud in the IT company’s accounts during 2007-08. The Chartered accountants body, ICAI on Saturday issued showcause notice to auditor Price Waterhouse on its role in vetting Satyam’s accounts.
The ICAI President, Mr Ved Jain on Saturday said the showcause notice has been issued and Price Waterhouse has been asked to reply within 21 days. Price Waterhouse has maintained that it followed applicable audit standards and went audit evidence provide d by the company.
One man’s poison is another man’s food. This saying is highlighted by the way other IT companies are trying to take advantage of Satyam’s messy situation and try to shift the business of Satyam to them.
A few large IT companies in Kerala either work with Satyam or are competitors.
The head of a leading IT company said on the condition of anonymity, that across the IT industry efforts to take over Satyam’s clients in India or abroad has begun and they were also at it.
“We are working aggressively in India and abroad for this,” the IT firm chief said.
Satyam’s Ex-CFO Vadlamani Srinivas is under the spotlight now, and not for the right reasons. According to various businesss analysts and IT leaders, a scam of such a large proportion (7800 cr.) does not seem to be possible without the CFO having any knowledge about it. The CFO who soon gave his resignation after Satyam’s co-founder Ramalinga Raju tendered his fraud scam letter. Soon after the Raju brothers were taken i nto arrest, the Satyam CFO too was arrested.
Suitors for troubled Satyam Computer may keep away, as the government on Sunday clarified that selling the company was not the mandate of the newly appointed Board of the IT major.
“That is not the mandate of the (three-member) board,” Corporate Affairs Minister Prem Chand Gupta told reporters today when asked whether there was a possibility of a buyout of the beleaguered IT major whose board has been superseded by the government.
Satyam Computer earlier decided to appoint investment banker DSP Merrill Lynch to look for a strategic partner and explore possibilities of merger and acquisition. The investment company, however, backed out of the deal after the disclosure of fraud by Satyam’s founder Ramalinga Raju. Read more
While Ramalinga Raju maintains that he did not have any ulterior motive in inflating the profits of Satyam, reliable sources reveal that Ramalinga Raju infact did pocket up money upto Rs. 1230 crores by selling Satyam shares which are now worth Rs. 66 crores only.
As the enormity of the fraud is surfacing, with the government, regulators and state authorities tightening their noose on Raju and the firm, information available with stock authorities reveal that all the promoter shares held through SRSR Holding were pledged for Rs 1,230 crore.
As per the statutory regulatory filings, the process of pledging started way back in September 2006, when promoter entity SRSR Holding held over 2.78 crore shares, comprising a 8.51 per cent of total equity.
As on September-end, 2006, these shares were worth Rs 2,275 crore at a price of Rs 818 a share. However, at the current price of Rs 23.85, the equity pledged with institutions is worth just about Rs 66 crore.
These shares were worth about Rs 500 crore a day before Raju made the disclosure about cooking of accounts and financial fraud, with scrip ruling low at Rs 179 a share on January 6. From the very next day, stock started plunging and touched an intra-day low of Rs 6.30 a share on Friday.
In his disclosure, Raju had said that “in the last two years, a net amount of Rs 1,230 crore was arranged to Satyam (not reflected in the books of Satyam) to keep the operations going by resorting to pledging all the promoters shares…”
The newly appointed board by the Government after dissolving of the previous Satyam Board is all set to meet on Monday, 12th January 2009 aand discuss the course of future action in regards to Satyam.
The government on Sunday nominated noted banker Deepak Parekh, IT expert Kiran Karnik and former SEBI member C Achuthan to Satyam
Computer’s Board, which will meet tomorrow at Hyderabad to chart out the future course of action.
“We will meet tomorrow at Hyderabad,” HDFC Chairman Deepak Parekh told reporters.
Parekh along with Karnik, former Nasscom president, and Achutan was nominated to the board by the government in order to stabilise the fraud-devastated Satyam Computer Services.
Asked whether he would head the board, Parekh said, “Decision to this effect will be taken tomorrow when the board meets for the first time.”
The newly appointed board members would be reaching Hyderabad tonight, he added.
Huge losses to investors aside, the Satyam scandal has caused “serious damage” to India Inc’s reputation as well as the country’s regulatory authorities outside, the government has said.
Seeking to dismantle the existing board and to nominate ten new directors at the beleaguered IT firm, the Centre has said in its petition before the Company Law Board that the “interests of the company will not be safe in the hands of the present board of directors.”
“The admission of fraudulent manipulation of the financial affairs has created an adverse impression in the minds of the trade, business and industry across the world.”
“This has also resulted in serious damage to the reputation of Indian Corporate sector and the regulatory mechanism in the eyes of the world,” the government said.
Allowing the government to nominate 10 new directors, the CLB said in its order that the “present board of directors stands suspended with immediate effect” and the new board should meet within seven days of its constitution and “take necessary action to put the company back on the road.”
It also asked the new board to submit periodical reports to the Centre and the CLB on the company’s state of affairs.
The CLB also observed that the residual board members at the company after a string of resignations are those “who were also party to the impugned decision to invest substantial funds in the companies related to Raju, the decision of which was the starting point of the downward trend in the fortunes of the company.”
Besides Satyam, Ramalinga Raju and brother Rama Raju, the government in its petition has also named the company’s CA and auditor Price Waterhouse, Company Secretary as well as all the directors.
This include also those independent directors who have resigned — Vinod Dham, Rammohan Rao, K G Palepu and Mangalam Srinivasan, as well as former Cabinet Secretary T R Prasad, V S Raju and interim CEO Ram Mynampati.
The CLB has also asked all the respondents to submit their replies to the petition by February 20.
The CLB had ordered the Central Government to immediately constitute a fresh board of the company with not more than ten “persons of eminence as directors.”
“The Central Government may also designate one of them as the Chairman of the Board… The said Board will continue till further orders.”
The government said in its petition that Satyam has about three lakh shareholders, over 53,000 employees and has clients in over 60 countries, besides India. It has received a number of awards for best corporate governance.
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