Satyam trying to reassure wary investors
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AP
2009-01-09
Top executives of beleaguered Indian outsourcing company Satyam Computer are struggling to reassure investors, employees and clients after its chairman resigned following an admission he cooked accounts and inflated profits for years.
"We are assuring them of our determination to fix this in every which way possible," Ram Mynampati, the company's interim chief executive officer told reporters on Thursday, adding the company would cooperate in the fraud investigations.
Satyam's balance sheets - riddled with "fictitious" assets and "non existent" cash - contained a $US1 billion ($A1.41 billion) hole that could no longer be concealed after a deal intended to save the struggling company was abandoned, company founder B Ramalinga Raju said in a letter to the board on Wednesday.
Mynampati said the company's top executives relied on audited accounts and were "shocked" by Raju's admissions. He said its auditor, PricewaterhouseCoopers, would be contacted for an explanation soon.
Chief financial officer V Srinivas resigned on Thursday, Mynampati said at a televised news conference in the southern city of Hyderabad.
The scandal has shaken investor confidence and prompted Indian business leaders to urge authorities to beef up corporate governance.
Infosys Technologies Ltd, another big outsourcing company, said on Thursday the fraud was deplorable and the government and regulators "must investigate and make necessary changes to regulations so that such incidents do not happen in future."
The scandal comes at a delicate time for India's information technology companies which are struggling against a global slowdown and waning economic growth at home. India's IT firms derive 40 per cent of their global revenues from financial services clients.
Mynampati said board members were investigating the details of a letter that Raju had written to them. He didn't outline the contents of that letter, but said Satyam's "liquidity on the balance sheet is not very encouraging."
Employee salaries have been paid through December but some vendors were still awaiting payment and Satyam was considering "options in terms of outstanding responsibilities," he said.
It was not clear where Raju went after he quit on Wednesday, said company spokeswoman Archana Uttapa.
Trading on India's stock exchanges was closed on Thursday because of a holiday, but on Wednesday, news of the fraud at Satyam Computer Services Ltd dragged the benchmark Sensex stock index down 7.3 per cent - with Satyam's shares plummeting nearly 78 per cent.
On Thursday the Bombay Stock Exchange issued a notice saying it was removing Satyam Computers from the Sensex.
The chief minister of Andhra Pradesh, the south Indian state where Satyam is headquartered, wrote Thursday to Prime Minister Manmohan Singh asking him to appoint a management team that could restore confidence in the company and help protect its employees and investors.
The company employs 53,000 people - among the two million Indians working in the country's booming high-tech industry, which last year brought in an estimated $US40 billion ($A56.3 billion). Satyam's clients include a slew of Fortune 500 companies including Nestle, General Electric and Ford Motors.
Holders of the company's US-listed shares - which have been halted from trading on the New York Stock Exchange while regulators investigate - have filed two class action suits against Satyam, the law firms representing the investors said in separate statements.
The suits filed by Vianale & Vianale LLP and Izard Noble LLP allege Satyam and its top executives issued false and misleading financial statements and violated federal securities laws, the statements on their websites said.
A leading business grouping, the Confederation of Indian Industry, has demanded that the loopholes in regulation, accounting, audit and governance that allowed such lapses be addressed with urgency.
Amar Ambani, a vice president of brokerage firm India Infoline Financial Ltd, said the manipulation of accounts at Satyam had the potential to severely dampen foreign institutional and direct investment into India.
"This raises serious doubts about the involvement of auditors and independent directors in the working of a company," Ambani said.
Muneeza Naqvi
