The Hindu Business Line : A corporate saga that raised several questions

Hyderabad, April 12 The quest for a suitor by the embattled Satyam Computer Services, should, with near certainty, be over on Monday. The six-member Government-appointed Board would pick the suitor that day, ending weeks of speculation on who will takeover the reins of the IT major.

The Board may take a day or two more to announce the name as they need the approval of the Company Law Board and Government to do so.

The twists and turns after the startling confession by Mr B. Ramalinga Raju, the founder Chairman, on January 7, 2009, could make a good script for a popular crime thriller.

As things unfolded, the Satyam saga raised several questions — the efficacy of regulatory and enforcement agencies in pre-empting such offences, the responsibility of auditing firms, the role of independent directors and the part played by banks.

The main concern, however, was about the future of 53,000 employees. Once referred to as one among the Top Five Indian IT services companies, Satyam had sunk into a deep financial and identity crises following Mr Raju’s confession that he had resorted to fudging of balance sheets for several years.

The scrip, a darling bluechip for over three lakh investors, plummeted, touching a low of Rs 6.30 on the NSE. Shocked, regulators and government agencies launched multiple probes into financial, regulatory, criminal and auditing offences.

The CBI, which took over the anchor investigation from CID of Andhra Pradesh, had termed it the “the biggest of all scams” perpetuated by “meeting of minds in secrecy”.

The turn of events at the Hyderabad-based company had a telling impact on its relationship with clients. While some such as State Farm Insurance snapped ties, several others made quick enquiries on the financial and organisational abilities of the fraud-hit company to execute projects in hand. Most have preferred to wait and watch, including Cisco and FIFA.

Corporate developments

Soon after Mr Raju’s confession, Mr Ram Mynampati, the then President, became an interim Chief Executive Officer, and other top Satyam executives (named as very efficient executives by Mr Raju in a confessional letter) joined him in an attempt to keep the company afloat.

But the Union Government had other ideas. It dissolved the disgraced board and appointed a six-member board — including Mr Kiran Karnik, former Nasscom chairman; Mr Deepak Parekh, HDFC Chairman; and Mr C. Achuthan, former SEBI board member — to help the company shrug-off the crisis.

Rich in corporate, IT, regulatory and auditing knowledge, the board members made a quick assessment of the financial health and began simultaneous talks with clients, employees, bankers, Company Law Board, Ministry of Company Affairs and SEBI.

They convinced clients to stay, explained the state of affairs to the staff, got Rs 685 crore of working capital loan from banks and persuaded the Government and regulators to relax buyout norms to invite strategic bidders. Their intervention worked.

The company, which many thought would cave in, registered collections to the tune of Rs 2,000 crore in the January-March quarter (compare this with the current market cap of Rs 3,176 crore!). Most employees too have stayed, with the latest headcount figures mentioned by board members under anonymity well in excess of 43,000, in addition to about 4,000 on contract.

The impact of clients leaving would only be in the range of 10 and 15 per cent of the company’s revenues, sources have said. And, the company has only used less than half of the loans sanctioned.

While claims about non-payment of tax deducted at source and PF dues abounded, a highly placed source at Satyam recently confirmed that all such dues have been cleared. However, the revised results for the company are yet to see the light of day. After seeking an extension till March 31 this year for the December 2008 quarter results, the company has sought another extension for the same till June 30 this year.

With the Board announcing its move to pick a suitor, all kinds of names popped up. While L&T, Tech Mahindra, iGate, the Hindujas and the Spice Group confirmed their interest at some stage or the other, names such as IBM, HP, CSC, HCL and Reliance also did the rounds before fading away.

The final tally, however, boiled down to a handful, which includes L&T, Tech Mahindra and WL Ross, with players like iGate and the Spice Group withdrawing from the race citing either inadequate information or tardiness by the Board. It is also believed that Cognizant is bidding in conjunction with WL Ross, but neither company has yet confirmed it.

The biggest threat suitors face is the dozen class action suits the company has against it. The company recently said that its liabilities from such suits could, at a maximum, be around $100 million, based on an estimate by a research firm that used mathematical algorithms and past data on suits to arrive at the figure.

Related Stories:
‘Satyam sale brings in fresh phase of uncertainty’
Satyam winner may be named on April 13
Satyam to seek tech, financial bids in April second week
Financial bids for Satyam likely by April 9
Satyam to call for global bids
L&T, Spice Corp, Tech Mahindra in race for Satyam
‘Satyam going ahead with bidding process’

More Stories on : Economic Offences | Software | Satyam Computer Services Ltd

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Airtel’s long distance revenue comes under CVC scanner

Satyam staff worried new employer may cut jobs

Main suitors for Satyam… but will there be a dark horse?

Satyam board has right to reject low-priced bids

A corporate saga that raised several questions