‘Satyam fiasco may threaten FDI in India’

In what could be termed as the biggest corporate fraud,Satyam on Wednesday made a shocking disclosure of accounts fudging by its founder Ramalinga Raju,who then quit as chairman,leaving an uncertain future for the company and its 53,000 employees.

Raju,in a statement,said that Satyam’s profits had been massively inflated over recent years but no other board member was aware of the financial irregularities.

Quoting Jacob Rees-Mogg,the lead manager with Somerset Capital Management,a fund that specialises in emerging markets,NYT said,”[The fraud will make people even more nervous about investing in India and other developing markets”.

Meanwhile,the ‘Wall Street Journal’ said,”[The chairman of one of India’s largest technology companies said he concocted key financial results,… sending shock waves across India and likely prompting investors to question other corporate results as the once-hot economy slows”.

British daily the ‘Financial Times’ said: “Its (Satyam) disclosure will ring alarm bells for hundreds of Fortune 500 companies across the world that entrust their most critical data and computer systems to Indian outsourcing companies and threatens to damage the country’s reputation as a place to do business.”

Satyams’ clients ranged from Unilever and Nestle to Cisco,GE,Sony and,until recently,the World Bank.

NYT further said,”Some of India’s biggest conglomerates started out as family-run companies,and analysts fear the taint of corruption from Satyam’s poor governance,lax accounting controls and a lack of transparency could sully any of those big companies for investors and customers.”

Meanwhile,India’s Corporate Affairs Ministry and SEBI announced that the episode would be probed into and action taken against the perpetrators of the fraud that entails inflating profits and creating fictitious assets.

The government said the entire issue would be referred to the Serious Fraud Investigation Office.

Market analysts said the revelations could lead to a major shake-up in India’s outsourcing industry as the disclosure made by Satyam could lead to the firm shutting down or even sold off.