The government may itself subscribe to preference shares of the beleaguered and cash-strapped software exporter Satyam Computer Services Ltd or ask state-owned financial institutions to do so to ensure quick fund infusion into the company. This could then well be the first such kind of government intervention in a private enterprise devastated by a mammoth fraud by its principal promoter. According to government officials involved in the discussions,the funds made available to Satyam via subscription to preference shares by the government or its institutions will be used to pay salaries to its employees and run day-to-day operations. The monthly salary bill of Satyams 51,000 employees is estimated at about Rs 550 crore. Preference shares get precedence over ordinary shares when a company pays dividend. The dividend rate is generally fixed at the time of issue of such shares and in the case of cumulative preference shares,the dividend if not paid in a particular year because of low or no profits gets carried over to the next year. Preference shares,unlike ordinary shares,do not carry voting rights and cannot be traded in the stock market,but can be sold back to the company. And when a company is wound up,they get their dues ahead of ordinary shareholders. The sources said the government has not firmed up its mind on the modalities of bailing out Satyam. While the Ministry of Corporate Affairs is awaiting the report of the new directors before deciding on further remedial measures,sources said,a soft loan by a syndicate of banks is another option the government will explore. The directors report is likely in the next 4-5 days. The sources said extending a soft loan to the company is also contingent upon its ability to pay back. Subscribing to preference shares is being favoured now. This will be done only to save jobs,prevent Satyams isolation and put it back on track. Once it is viable again,the preference shares can be sold back to Satyam, they said. The government is keenly awaiting the new boards report on the extent of the companys liquidity crunch. Frankly,we expect a clear picture to emerge within the next 4-5 days, a source said. Denying any consensus on the quantum of financial assistance to be provided to the IT firm,sources said the only agreement was Satyam needed to be helped out. Other government sources said the government is not inclined to offer any bailout package as that could involve the companys liabilities as well. Besides,if it concerned the entire sector,the government could think of something,but doing it for an individual company could lead to similar demands and expectations from other companies in future. The government,these sources said,does not want to be seen as taking over the company in any way as it could be made a party in legal wrangles. There are already 7-8 class action suits in the US against Satyam. As Satyam software is used to prepare payrolls of government employees in countries like Australia and Singapore,ambassadors of these countries have got in touch with the government to check on Satyams future. Meanwhile,the Congress today defended Andhra Pradesh Chief Minister YSR Reddy,who is being accused by the opposition TDP of bending rules to award land and contracts to Maytas. But a Congress MP sought to lend credence to these allegations,saying the Centre should look into these land deals. Thousands of acres of land around Hyderabad were bought by companies run by Ramalinga Rajus family. That is why land rate has gone skyward in Hyderabad. The government of India should take over this land and inquire as to who owns this land as many tracts of it could be under benami ownership. Since the land was bought with the money of small investors,they could be compensated by selling the land, Rajya Sabha MP V Hanumanth Rao told The Indian Express. He met Company Affairs Minister Premchand Gupta to put forth the same demand. The Bofors scandal involved only Rs 60 crore and we lost three elections because of this. The Satyam scam is much,much bigger. Investors want a CBI probe into it. Even the Andhra Pradesh CM has said he has no objection to it, Rao said.
