Satyam aims to continue business, protect staff

HYDERABAD: Beleaguered Satyam on Thursday embarked on a major damage control exercise to pull itself from the brink, pushed to by founder

A press conference after the resignation of Ramalinga Raju, at Satyam campus in Hyderabad. 

HYDERABAD: Beleaguered Satyam on Thursday embarked on a major damage control exercise to pull itself from the brink, pushed to by founder 

A press conference after the resignation of Ramalinga Raju, at Satyam campus in Hyderabad. (TOI Photo)

Ramalinga Raju, saying arranging liquidity, assuaging fears of 53,000 employees and continuing the existing business would be its top priority. 

Not ruling out initiating action against Raju or the auditors PwC for its complicity in fudging of accounts, the acting CEO Ram Mynampati said every possible action would be considered against Raju, who quit as chairman after making startling revelations on corporate India's biggest fraud entailing about Rs 7,800 crore.

Ramalinga Raju, saying arranging liquidity, assuaging fears of 53,000 employees and continuing the existing business would be its top priority. ( Watch )

Not ruling out initiating action against Raju or the auditors PwC for its complicity in fudging of accounts, the acting CEO Ram Mynampati said every possible action would be considered against Raju, who quit as chairman after making startling revelations on corporate India's biggest fraud entailing about Rs 7,800 crore.

Aimed at preventing panic exodus of highly talented workforce and top management, the interim CEO said that the December'08 salaries has been paid and the management would be focusing on arranging funds, which at the present juncture was a cause for concern.

"We do not rule out recommending action against Ramalinga. Many actions are possible for Satyam's future," he said, adding that the company was not aware of his whereabouts amid reports that the disgraced founder of the country's fourth largest IT company had left for the US yesterday before the news of his resignation and disclosure became public.

On the auditor PriceWaterhouseCoopers who have been authenticating year after year the company's accounts, which Raju admitted to fudging by inflating profits and creating fictitious assets, Mynampati said: "We have not verified what process PwC took to certify financial statement. We are not yet in touch with PwC."

In the middle of the press conference held by the interim management at Satyam's headquarters here, CFO Valdamani Srinivas, who is the financial custodian of the company, sent in his resignation but Mynampati said the Board would decide on it on January 10 and anyway he has to serve notice period.

Interim CEO Ram Mynampati declared that the liquidity and cash-in-hand were not encouraging, although the company managed to pay salaries for December month.

"Some outstanding payment to vendors is yet to be made... we are verifying the liquidity and balance sheet... we have to raise liquidity in near term and are confident of raising it," said Mynampati, while adding that his appointment was legal.

On the financial irregularities disclosed by former Satyam Chairman Ramalinga Raju, Mynampati said the team was not yet in a position to answer these issues, as it is still ascertaining disclosures made by Ramalinga Raju and trying to correct financial irregularities.

He said the regulatory bodies have already started their inspection and a team of market regulator SEBI was in Satyam talking to associates.

He said the company has started to actively reach out to customers globally and has been heartened to receive strong expressions of confidence and Readers react
support from them.

"Our top 100 clients account for 80 per cent of Satyam's revenues," he said, adding that the top priority would be to clear pending contracts and continue with the business as usual.

The company founded by Ramalinga Raju in 1987 received its worst shock yesterday when he disclosed what has now become the country's biggest corporate fraud involving about Rs 7,800 crore.

Satyam is in the process of finding new investment banker as soon as possible to pursue strategic options left with the company and also expand the Board, which is now left with only three members including Mynampati.

Shareholders would be consulted on whatever options there are before the company, he said to a question on whether the company would explore merging or being taken over.

Key brokers boycott Satyam counter

The stock of Satyam Computer Services may be removed from the Sensex, the 30-stock benchmark index of the Bombay Stock Exchange (BSE), after the company’s Chairman and founder Ramalinga Raju today revealed manipulation of its accounts.

While a BSE spokesperson refused to comment, brokers said the stock would hold little interest for investors following this episode. The BSE considers listed history, trading frequency, final rank, market capitalisation weightage, industry/sector representation and track record while selecting Sensex constituents.

“There is a churn in the index after every market boom. So, it is likely that this stock is left out of the Sensex at the next review,” said Gaurav Dua, head of research at Sharekhan. The BSE Index Committee does a periodic review of the Sensex constituents. Shares of Satyam Computers fell 77.69 per cent to close at Rs 39.95 a share in Wednesday’s trading session, taking its market capitalisation down to Rs 2,692 crore.

Meanwhile, even as the drama over Raju’s revelations and resignation unfolded on Wednesday, key brokerages were quick to drop the stock from their coverage.

Several domestic as well as foreign broking houses such as Religare Hichens Harrison, India Infoline, Emkay Global Financial Services and Credit Suisse have suspended coverage of Satyam, citing that the “current financials of the company cannot be relied upon”.

Raju today said the company’s profits had been inflated over the last several years.

“As such, we are unable to issue any further investment advice on Satyam and suspend our coverage of the stock,” said Credit Suisse, which had an underperform rating on the share earlier. Religare Hichens Harrison has gone a step further to say that this development would make Satyam unattractive for any competitor or a private equity player to take over the company.

For Satyam, the long-term outlook remains negative as client and employee attrition would rise significantly in coming quarters due to the adverse impact of the developments. In the short term, a lot of Satyam’s clients would migrate to competitors like Infosys, TCS and Wipro, the brokerage said.

Stocks of Infosys Technologies and Wipro today rose by 1.67 per cent and 0.23 per cent respectively on anticipation that these companies would gain from the business that Satyam was likely to lose.

Domestic brokerage Angel broking called this episode “India’s Enron” and went on to say that apart from the immediate impact, it would have medium-term repercussions in terms of global perception of Indian companies and local and global investor confidence in Indian stock markets.

India Infoline has also dropped the Satyam Computer stock from its coverage with immediate effect. “This episode has the potential of severely dampening FII and FDI sentiment towards India,” said Amar Ambani, Vice-President (Research) at India Infoline.

According to a report from Emkay Global Financial Services, the Satyam episode will lead to high chances of collateral damage to the sector’s premium valuations as well as the Indian market. “We had been arguing over the past few days that Satyam’s ‘low market cap, high cash balance’ was an appeal for both strategic/financial investors given Satyam’s strong offshore capabilities and notable client roster. However, with the damaging revelations from the company, we believe that the argument does not hold any longer. We suspend our rating and target price on the stock,” the Emkay report said.

Satyam embarks on damage control exercise

Beleaguered Satyam today embarked on a major damage control exercise to pull itself from the brink, pushed to by founder Ramalinga Raju, saying arranging liquidity, assuaging fears of 53,000 employees and continuing the existing business would be its top priority.

Not ruling out initiating action against Raju or the auditors Price Waterhouse (PwC) for its complicity in fudging of accounts, the interim CEO Ram Mynampati said every possible action would be considered against Raju, who quit as chairman after making startling revelations on corporate India's biggest fraud entailing about Rs 7,800 crore.

Aimed at preventing panic exodus of highly talented workforce and top management, the interim CEO said that the December 2008 salaries has been paid and the management would be focusing on arranging funds, which at the present juncture was a cause for concern.

"We do not rule out recommending action against Ramalinga. Many actions are possible for Satyam's future," he said, adding that the company was not aware of his whereabouts amid reports that the disgraced founder of the country's fourth largest IT company had left for the US yesterday before the news of his resignation and disclosure became public.

On the auditor Price Waterhouse, who have been authenticating year after year the company's accounts, which Raju admitted to fudging by inflating profits and creating fictitious assets, Mynampati said: "We have not verified what process PwC took to certify financial statement. We are not yet in touch with PwC."

In the middle of the press conference held by the interim management at Satyam's headquarters here, CFO Valdamani Srinivas, who is the financial custodian of the company, sent in his resignation but Mynampati said the board would decide on it on January 10 and anyway he has to serve notice period.

Interim CEO Ram Mynampati declared that the liquidity and cash-in-hand were not encouraging, although the company managed to pay salaries for December month.

"Some outstanding payment to vendors is yet to be made... We are verifying the liquidity and balance sheet... We have to raise liquidity in near term and are confident of raising it," said Mynampati, while adding that his appointment was legal.

On the financial irregularities disclosed by former Satyam Chairman Ramalinga Raju, Mynampati said the team was not yet in a position to answer these issues, as it is still ascertaining disclosures made by Ramalinga Raju and trying to correct financial irregularities.

He said the regulatory bodies have already started their inspection and a team of market regulator Sebi was in Satyam talking to associates.

He said the company has started to actively reach out to customers globally and has been heartened to receive strong expressions of confidence and
support from them.

"Our top 100 clients account for 80 per cent of Satyam's revenues," he said, adding that the top priority would be to clear pending contracts and continue with the business as usual.

The company founded by Ramalinga Raju in 1987 received its worst shock yesterday when he disclosed what has now become the country's biggest corporate fraud involving about Rs 7,800 crore.

Satyam is in the process of finding new investment banker as soon as possible to pursue strategic options left with the company and also expand the board, which is now left with only three members including Mynampati.

Shareholders would be consulted on whatever options there are before the company, he said to a question on whether the company would explore merging or being taken over.