Interim team calms clients and seeks to raise funds

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Mumbai/Hyderabad: Interim managers at crisis-ridden Satyam Computer Services Ltd on Thursday launched frantic efforts to stay afloat a day after the Rs 9,440-crore falsification of accounts by disgraced founder & former chairman B Ramalinga Raju came to light. They accorded top priority to arranging funds and paying staff salaries.

Though confident of meeting obligations this month, acting CEO Ram Mynampati conceded at a crowded press conference in Hyderabad that the liquidity position and cash in hand were “not encouraging”, and that the company would need some assistance. “We have to raise liquidity in the near term, and are confident of raising it,” Mynampati said.

While the interim team fielded questions from the media, Satyam CFO Vadlamani Srinivas quit abruptly, but Mynampati did not accept his resignation. The Satyam board would take up the matter at its January 10 meeting.

At the same time, the government and markets regulator Sebi initiated investigations into the scam. A Sebi team landed in Hyderabad in the morning, but police did not move in, maintaining there was no complaint, as Andhra Pradesh chief minister YS Rajasekhara Reddy placed the onus of taking action squarely on the Centre.

In a bid to pull the company back from the brink of collapse, the interim management began contacting the company’s top 100 clients—they account for over 80% of revenues—to assure them it was business as usual, while striving to hold together the flock of 53,000 employees. Mynampati did not rule out action against Raju, who quit on Wednesday.

Fir its part, company auditor Price Waterhouse sought to absolve itself of any responsibility, saying: “The audits were conducted in accordance with applicable audit standards and were supported by appropriate audit evidence.” The firm, which is under scrutiny by the government and regulators for its role in the episode, also promised to “fully meet its obligations to cooperate with regulator and others”.

While auditors’ regulator ICAI initiated a probe into the role of Price Waterhouse, a pair of US law firms filed two class action suits against Satyam, which is also listed in New York and Amsterdam, on behalf of shareholders. If found guilty, the company and its officials could face millions of dollars in claims and stiff penal action.

In Mumbai, investors braced for markets to reopen after Thursday’s holiday, expecting Satyam stock to be pounded further. The company’s shares were hammered down by almost 80% on Wednesday after Raju’s letter of confession to the board was released. The BSE struck Satyam from all its major indices, including the Sensex, BSE 100, BSE 200, the BSE 500, BSE Teck and BSE IT.

It is also clear that the other corporates in India are reluctant to take up a strategic stake in Satyam. Narayan Murthy said in an interview, “We have no interest in buying Satyam and we will not touch such a tainted company.” Similarly, Larsen & Toubro also said that its 4% stake in the company was a portfolio investment and ruled out the possibility of a purchase or arrangement.

Speaking to FE, Yogesh Lohiya, CMD, GIC Re said, “The Satyam fraud is a matter of serious concern. We will not just re-evaluate Satyam, but also our exposure to the whole IT sector. The larger issues of corporate governance, the role of institutional nominees, independent directors and auditors need to be introspected now.”

Similarly, the LIC, which has a 4 % stake in Satyam, is keeping a watch on developments before deciding its course of action. “We don’t have board-level representation in the company and as a shareholder, we have to protect our interest,’’ said a senior LIC official. He refused to comment on the possibility of LIC exiting Satyam at this time.