BANGALORE: At a time when India software Inc is waking up to perhaps the biggest corporate scam the country has seen, industry leaders such as N R Narayan Murthy who founded country's second biggest tech firm Infosys, described developments at Satyam as shocking, painful and a good warning for other companies in the sector. The Satyam episode is a good warning signal for all managements, said Mr Narayan Murthy, the non-executive chairman of Infosys and one of the strongest votaries of corporate governance in the country. Speaking to ET, Mr Murthy said, it is time for authorities to step in with appropriate action. Following is Mr Murthy's unedited views on the subject. I am shocked and painfully dismayed at what has happened at an important software company in India. It is a total failure of governance. I only hope that relevant authorities get to the bottom of this and take appropriate action. It is important to remember that one Satyam does not make the entire Indian software industry. I believe it is an isolated case. I want foreign investors to realise that there are many honest managements and good companies in this country. While what has happened at Satyam is totally regrettable, I believe that it does not represent India. It just represents one individual and one company. In the short term, investors will start looking deeper into all companies they want to invest in, and rightly so. Once they realise that things are not all that bad and that most companies are decent and managements honest, they will regain their faith. This too will pass. Investors will consider this as an extreme case. Right now, all of us must conduct ourselves in the most legal and ethical manner. It is a good warning signal for all managements. |
Showing posts with label ram. Show all posts
Showing posts with label ram. Show all posts
Friday, January 9, 2009
Satyam a failure of governance: Narayan Murthy
In Raju's hometown, big panic for small investors
Investors in West Godavari, Raju’s native district, had bought shares of the company through loans and using their savings of many years. Through the period of enviable growth the company showed, the investments multiplied.
“Many companies have invested in Satyam as well as in Maytas Infra and Maytas Properties (the two companies owned by the Raju family which Satyam proposed to acquire for $1.6 billion) especially from Eluru, Tadepalligudem, Bhimavaram, Tanuku, Palakollu, Narasapuram and Jangareddigudem towns in the two coastal districts through stock-broking firms believing them to give huge returns,” a stock broker told Business Standard, on the condition of anonymity.
According to information available with the stock-broking firms, traditional investors in the East Godavari district trade anywhere between Rs 100 crore and Rs 120 crore every day.
“Of this, Satyam’s share would be about 5 per cent (buying and selling of 50 million shares). With Satyam’s share price plummeting to about 80 per cent yesterday, investors who bought the company’s shares lost about Rs 3.5 crore on a single day, while those who invested between Rs 10 crore and Rs 12 crore and held the stock, lost Rs 7-9 crore. Together, they lost over Rs 10 crore in Satyam yesterday,” the stock broker said.
A worried P Veerabhadra Raju, who owns 5 acres of mango and cashew groves in East Godavari, said, “We never expected the Satyam stock would nosedive for all the wrong reasons.
“I had bought 1,500 shares of Satyam at Rs 480 per share in 2007, thinking that they will offer value for us in the medium to long-term. With yesterday’s disclosures, the share price dropped to Rs 40. I don’t know what will happen and whether to hold the shares or sell them,” he said.
ASN Raju, regional manager (Andhra Pradesh) of Networth Stock Broking, said the traditional investors (approximately 6,000) in these two districts now have no other option left than to wait for the stock price to go up. “And, it is unlikely to happen in the near term,” he said.
Selling the shares seems an unlikely possibility.
HIGHLIGHTS: Satyam Press Conference
Salient features of the Satyam Press conference in evening of January 8, 2009
Ram Mynampeti, interim CEO says
Shocked by disclosures
Aim to ensure business continues uninterrupted
Will work with regulatory bodies closely
Reaching out to customers
Practicing transparency in everything
Outreach to customers, speaking individually to each one
Positively overwhelmed by each employee's passion
Ascertaining liquidity position and verify Raju's statements
Reached out to find new board members
In summary we are focused to sustain ops and assuring customers to end this quickly
Committed to strengthening governance
Have not seen huge attrition
Satyam staff member:
Customers and associates are with us
Customers have shown solidarity
Q&A
Q: How did the company have only 3% operating margin?
A: We are confronted with this situation for less than 36 hours ago. Most of us are not able to answer such questions. We need to verify the veracity of the statements. What we can say is that we have a good business. We have good visibility on the business we manage and their profitability. None of us have information beyond our groups at this time. We will be in a position to do so after we finish the process.
Q: How is the company functioning without board members? What happens to Price Waterhouse?
A: To correct you I (Ram Mynampati) am a board member and we have two other directors. So the company can function.When we review info in board meetings, we are presented by audited numbers. We have not yet verified Price Waterhouse's process. We have not been in contact with Price Waterhouse, but we will be.
Q: What is your working capital policy? What is your whistleblower policy?
A: We have taken care of salaries for December. We have some outstanding payments due to vendors. The liquidity position is not encouraging. We are looking at options to improve liquidity. CFO Strinivas Vadlamani has resigned but we have not approved it yet. There are a few CAs playing various roles and they have come together to assess the situation. Nobody has been identified to replace the CFO.
Q: What news of chairman and MD?
A: Many senior leaders had a conference call with chairman and MD within half an hour of receiving the letter. They have assured us support. We have not needed them yet; what we need is the CFO's assistance.
Q: What about liquidity?
A: We have verified the balance sheet figures such as receivables. On liquidity we need some assistance for business continuity. Cash on hand is not very encouraging.
Q: Service delivery?
A: We are ensuring that delivery of services happens. Forex for travel etc is taken care of.
Q: Do you anticipate any threat from any major shareholder? The issue is taking a political stance, do you have apprehension?
A: We have to deal with regulators in a transparent fashion. We (senior leaders) do not need to do this for financial reason; we are doing it for emotional reasons.
Q: Why did you not tell us the CFO quit earlier?
A: The resignation has reached today and it has not been accepted. Also, every one of us has a notice period and he will be back in office next week. We are in touch with him.
Satyam today is completely different than what it was yesterday. We are driven today by the stakeholders' interests.
On timing of the press releases
We have a crisis on our hand. We are doing everything we can to deal with the situation expeditiously. We are trying to cope with it in the best way possible.
Q: Are you looking for buyers?
A: We are exploring the option to induct new members, diluting equity and looking at a strategic investor. We need to transition. It can mean that we recast ourselves in a different model. We have to align income and expenses. We will have to operate differently. We need a new investment banker quickly.
Q: Where is Raju?
A: I am assuming he is in Hyderabad, but I do not know.
Q: You did take questions in conferences in the past along with Vadlamani. Why are you not able to answer on margins?
A: If you can recall, the only answers i had on margins was how to improve them.
Q: Regarding your whistleblower policy, irregularities were noticed earlier but not reported...
A: Can you be more specific? Can you site some instances? I cannot recall any.
Q: Who will be the new CFO?
A: There are many individuals who are capable in the orgn or bring external help, which will be decided by the board.
Q: How will you restore shareholder confidence?
A: I appeal to you to understand that the issue we are dealing with is huge. I have not dealt with anything like this in life. We will bring transparency for all stakeholders. But I reiterate I do not know what has happened.
Q: Will you restate results?
A: We have to announce Q3 results by the end of this month, and we will need to assess whether we need to restate. We are a highly matrixed orgn. The central processing office is the one that compiles the corporate results. We are all managing our business verticals.
Q: Why has Raju not signed the letter?
A: Well, that letter was sent from his email to us.
Q: How did board give permission to buy Maytas cos as you have no money?
A: There are decisions made in board on the basis of data available. We take this data on face value. I do not want to make any more comments.
Q: Why don't you file a police complaint against Raju?
A: We need to look at the reality of Raju's statement first before coming to any conclusion.
Q: Do you really have 52,000 employees?
A: At the end of September it was 53,000 and there would be attrition by 2,000 and no new recruitment has happened this quarter.
Q: Do you know if you have the money to last through January?
Today I do not know.
Q: What is your current capacity utilisation? It seems you have a large bench from Raju's letter.
A: We will put that out with the Q3 results.
Q: What went wrong with Satyam? even midcap cos have 10% margin and you were at 3%. Please answer the question as an IT professional?
A: It could have been a number of things - revenues, expenses. I will only be able to answer after assessment.
Satyam employees on the job, approach head hunters
Hyderabad: Employees of embattled outsourcing firm Satyam Computer Services Ltd are scrambling to send their resumes to job portals and other firms, but finding work may be difficult given tough market conditions.
As of September-end, Satyam, the country's fourth-biggest software exporter now bearing the dubious distinction of having perpetuated India's biggest corporate scandal in memory, said it had 52,865 employees in all.
On Wednesday, after chairman B Ramalinga Raju quit and said profits of the company had been inflated over the last several years, interim CEO Ram Mynampati, in a letter to employees, apologised for the "uncertainty and inconvenience" caused.
Warning employees of a "tumultuous quarter", Mynampati asked for their "involvement and ideas". But that did not appear to be a top priority for employees who seemed agitated as they entered the company's sprawling headquarters in the southern city of Hyderabad.
"How would you feel if you were in my position?" said one employee, reacting angrily to a reporter's question. Local newspapers said hundreds of employees had begun sending out their resumes to job portals and to other software firms.
But with a global slowdown putting the brakes on India's $50 billion IT industry, jobs will be difficult to come by.
Nasscom, the industry body, had earlier said it did not foresee job cuts, but lowered its 2008/09 job additions target to 200,000 from 270,000.
Wage increases were expected to be moderate for the next two years in the industry, Nasscom has said. "Today the market is not such that they will be absorbed easily," said Karthik Shekhar, general secretary of UNITES, an international outfit representing software professionals.
"We are in touch with the employees. They are waiting for more clarity from the management, but they are sending feelers." Satyam is due to hold a news conference at 1130 GMT. Satyam's rivals, who ware expected to pitch for its clients including General Electric, Nestle and Qantas, may be able to absorb some employees.
"If the employees go with the business, I reckon 55-60 percent of the employees will find work," said Mohandas Pai, director of human resources at larger rival Infosys Technologies. "Clients are likely to retain project managers and developers, so, in a worst-case scenario, about 40 percent of employees are at risk," he said, but declined to say if Infosys would consider pitching for Satyam clients or hiring its employees.
A project manager at an international IT services firm said he had received about four or five frantic calls from Satyam project managers, asking for jobs.
Others are choosing to pursue different options: a developer who has been with Satyam for seven years said he had been planning on taking a break to do a Ph.D for some time. This is a good time to do it, he said.
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