Moving swiftly on the day it took charge of fraud-hit Satyam Computer Services,its new board today announced that the top management would be changed and all efforts made to address the prime concern of liquidity,including asking main clients to make advance payments.
Announcing the decisions taken at the meeting of the three-member board constituted by the government,member Deepak Parekh,chairman of HDFC,said the government had agreed to provide temporary liquidity to Satyam. He said a new CEO and CFO would be appointed,while the government would fill vacancies on the board that would elect a chairman.
In New Delhi,SEBI chairman C B Bhave met Prime Minister Manmohan Singh and is believed to have briefed him about the latest developments on Satyam. Commerce Minister Kamal Nath said the government will consider a package for helping Satyam. Asked whether the government could extend even financial help to Satyam,he said,Of course. There are many jobs at stake and institutional stakes.
Parekh,former NASSCOM president Kiran Karnik and former SEBI member C Achutan said they discussed several options to take care of issues including restoring confidence of employees and availability of working capital and cash. Parekh said the board would do its best to convince and retain Satyams top clients.
The board would ask clients to pay advance against dues to tide over immediate liquidity needs. Noting there was a large number of receivables payments due from clients Parekh said: If (the receivables) come on time liquidity will be sufficient. But these need to be authenticated… Most of the clients are AAA (top investment grade rated). So we can ask them for advance against receivables.
The board has identified two independent accounting firms and they are likely to make their proposals tomorrow. Within 48 hours,a new independent accounting firm will be in place to look at the third quarter financial performance of the company,for the announcement of which the board is seeking extension beyond the scheduled January 16.
Working capital needs immediate attention, Parekh said,but added that the board has not yet determined the amount of liquidity that is required.
Asked whether the new CEO and CFO would be from the internal team,Parekh said he hoped that in the next few weeks the board would find someone. But given the situation,it would be difficult to find willing candidates. Asked if the board would approach banks for immediate fund requirements,he said: No bank will be willing to give credit line unless it looks at the authenticated numbers.
On whether the board would look at the possibility of merger,he said: We will look at all options. The top priority is to restore the confidence of customers,employees,suppliers and investors… Satyam has a lot of marquee customers,so the sustainability of service is a priority, he said.
Another member C Achutan said that the board has not sought any immunity from lawsuits as such for the company. About a dozen lawsuits have been filed in the US against Satyam,its founder Ramalinga Raju and his brother Rama Raju charging them with duping thousands of investors of billions of dollars.
Asked if auditors PricewaterhouseCoopers would be sued,Parekh said investigations were on and it was too premature to comment on the issue. On conflict of interest of two of the new board members,Parekh said: All three of us have been appointed by the Centre keeping in mind all the aspects. He,however,said that Kiran Karnik has resigned from the board of Satyam-AP government venture EMRI.
Meanwhile,the Economic Offences Wing of the CID plans to examine the role of PwC and at least five banks after Ramalinga Raju and CFO V Srinivas reportedly confessed that balance sheets had been fixed,fictitious bank accounts opened and papers created to show non-existent fixed deposits. Srinivas was said to have acknowledged that he was aware that the company showed non-existent fixed deposits.
The EOW is looking at what role some bank officials played in allowing Raju to show the fictitious fixed deposits. The investigating team may also question auditors why they failed to verify whether the fixed deposits shown by Satyam really existed or not.
Ramalinga Raju told police he was apprehensive of a hostile takeover and,therefore,rigged the balance sheets to show financial muscle to get more business. He confessed to fudging the balance sheets to show that non-existent cash was available. He believed that by showing inflated figures and a sound financial position,he could impress clients and get more business, a CID officer said.
Srinivas told the investigation team that he was never informed by auditors PwC if they had found discrepancies in the accounts. He accused the team of accountants under him at Satyam of fixing the balance sheets before board meetings.
Srinivas turned the tables on his mentor by stating that Raju and his brother B Rama Raju had asked him not to bother about bank deposits which appeared to be non-existent. This fraud had apparently been going on since 2001.
V Kaumudhi,IG,Economic Offences Wing,CID,said they had attached the confessional statements of Raju and Srinivas to the remand application submitted in the court today. Additional Chief Metropolitan Magistrate adjourned the matter and posted it for January 16. We have confiscated a number of documents and have sought data from the accounts section and management to investigate other angles. It is huge and interlinked, Kaumudhi said.
Ramalinga Raju,brother Rama Raju and Srinivas are in judicial custody and have applied for bail which will come up for hearing on January 16. A petition from SEBI seeking permission to question Raju and Srinivas will also come up for hearing the same day. Raju is being represented by lawyer S Bharat Kumar who said that at least 25 lawyers will defend Raju in various cases and will oppose the CID petition seeking his remand on the grounds that Raju is unwell.
Meanwhile,the New York Stock Exchange said Monday it will delist Satyam shares only if its average share price for 30 trading sessions goes below one dollar. With a plunge of over 90 per cent at the NYSE,Satyam slipped below one dollar level in early morning trade Monday but regained this mark shortly thereafter. (With agencies)