Satyam Computer Services needs to restate its accounts and appoint senior people as soon as possible to get back on track,but this will take time,the new board of the fraud-hit Indian company said.
Shares in Satyam jumped as much as two-thirds on Monday on expectations the new board,the first three members of which were appointed by the government on Sunday,would rescue the company in the wake of India’s biggest corporate scandal.
“It depends on how soon we get a CEO,it depends on how soon we get a good financial manager and it depends on how soon we get the accounts restated,” Deepak Parekh,a senior banker,told reporters after the first meeting of the new board.
“Account restatement is … one of the biggest issues we have because no one has faith in the numbers that are being produced so far,” he said.
Satyam founder Ramalinga Raju resigned as chairman last week,saying profits had been falsified for years and about $1 billion or 94 per cent of the company’s cash and bank balances at the end of September did not exist.
“If you have to go through four,five years of accounts … it is going to take time by the auditors,” Parekh said,adding he hoped to appoint a new accounting firm within 48 hours.
The new board met at Satyam headquarters in the southern city of Hyderabad to lay out a roadmap for the survival of the company after the fraud hit Satyam’s business prospects and triggered worries some clients may cancel contracts
“The option of a merger is always open,” Parekh said in response to a question.
Parekh said the company may have to ask for an extension of the month-end deadline to report its December quarter results and said if the receiveables as reported were correct,then the company should have adequate liquidity.
“But we have to confirm these receivables are the right numbers and are not overstated. And we have to confirm that the debt mentioned in the account is the actual debt and there is no more debt,” he said.
Indian shares have been hit as investors worried about the damage to foreign investment in Asia’s third-largest economy and the once-booming outsourcing sector.
“I think they will look at providing stability to employees and clients first. What they have to see in the next three months is that Satyam is still not bleeding,” said Avinash Vashistha,chief executive at consultancy Tholons.
“Also,we have to see if the government will extend some monetary support to Satyam to take care of salaries and all.”
Trade Minster Kamal Nath said the government was looking at all possible ways to help Satyam but did not elaborate.
Satyam,which in Sanksrit means “truth”,faced a crisis of “unimaginable proportions”,stand-in CEO Ram Mynampati said last week. The government’s unprecedented move to dissolve Satyam’s board came as it rushed to contain the fallout from what has been dubbed “India’s Enron”.
Shares in Satyam,which counts Nestle and General Electric among its clients,ended up 44 per cent in Mumbai after plunging 94 per cent in the past two trading sessions.
The stock had risen as much as 68 per cent earlier on Monday.
Still,Satyam,which specialises in business software,has seen its market value slashed to about $475 million at Monday’s close from more than $7 billion in the middle of 2008.
The fraud has dented hopes of thousands of graduates who said they had been promised jobs by Satyam,which was viewed as among the pioneers in India’s software services industry.
“It’s not only about the future of 53,000 employees,it’s about me,my friends and 5,000 to 6,000 of us who have got offer letters but are yet to be inducted into the Satyam family,” said Anji Reddy,an engineering graduate from Hyderabad’s prestigious Jawaharlal Nehru Technology University.
“It’s a tough market and I won’t find a job anywhere else easily.”
Separately shares in IT rival Wipro fell as much as 12 per cent after the World Bank barred it from contracts for four years since 2007 for providing “improper benefits to bank staff”. The World Bank previously barred Satyam for eight years.
Wipro said its World Bank revenue was insignificant and the decision would not affect its business and results.
Satyam’s 54-year-old founder and his brother have been charged with criminal conspiracy and forgery. The New York-listed company also faces securities fraud class-action lawsuits filed in the United States.