Megasoft: no material impact

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: Megasoft Ltd, among the three Indian IT companies in the World Bank’s list of debarred firms under its corporate procurement programme, said it was not materially important for the company to make the ban public in 2007, the year it was imposed, reports Surabhi Agarwal. The company’s statement is potentially damaging and could lead to trouble with Sebi and the bourses, as listed firms are supposed to make full disclosures to the stock exchanges.

On Monday, Megasoft’s share price slid 0.63% on BSE to close at Rs 15.76. The company has put all its acquisition plans on hold. The company had planned to buy a telecom company in Europe before this fiscal, and had set a price range of $25 million. But the plan has been shelved due to the liquidity crunch and the economic downturn.

The company has been barred for four years in December 2007 for participating in a joint venture with World Bank staff. Megasoft provides telecom software products to wireless operators and offshoring services. Its clients include IBM, Liberty Mutual and Sun Chemicals.

“The logic that we applied then was that the World Bank was no more our customer, and we were also shifting our focus from the onsite staffing services that we used to provide to the Bank. So, the ban was not going to have any impact on our financials,” GV Kumar, managing director & CEO, Megasoft, told FE. He added that the company presumed that the World Bank would not make it public, as it would not be of any material importance to it, either.

The company started providing IT staffing services to the World Bank in 1996, and decided to discontinue the service in 2004. Its total revenue from the Bank was $6-7 million. Kumar elaborated that the 50:50 joint venture, Megasoft China, was set up in 2003 between Megasoft and Ben Hu, a former World Bank employee. “Hu had left the Bank in 2001 and had joined Megasoft’s board in 2003. We had made his appointment public and found nothing wrong in appointing him, as it is an industry practice to appoint former World Bank or IMF servicemen on company boards,” said Kumar.