The equities markets was hit hard with Satyam chairman and co-founder B Ramalinga Raju?s admission that the company was involved in a fraud of about Rs 40 billion over several years. The troubled software company?s scrip lost 77.69% of its value to close at Rs 39.95 on Wednesday against its Tuesday close of Rs.179.10. A whopping 14,30,09,827 Satyam shares changed hands during Wednesday?s trade.
The episode deepened the fears of the IT industry, which has been suffering due to the recession in the US and Europe. While industry dons are keeping their fingers crossed on the possible impact, they agree that they need to reinforce the ?trust? factor growing among their clients and put corporate governance sharply into focus. Many would like to see this as an isolated case and insist this too shall pass.
Satyam?s peers Infosys and Wipro expressed shock and concern over the issue. Officials, not wishing to be identified, say that the industry should demonstrate more transparency to investors and reinforce their commitment to corporate governance. ?What has happened is unfortunate,? says TV Mohandas Pai, Infosys board member and director, human resources, education and research and administration, warning, ?this is not representative of the Indian IT industry.?
?This is a fraud, and needs to be investigated by the regulator and deterrent punishment should be awarded so that such acts are not repeated,? he adds.
Equally shocked is Suresh Senapathy, executive director and CFO of Wipro. ?Wipro strongly condemns any attempt to mislead stakeholders,? he says. ?Global standards of corporate transparency are very high and we are confident that this is an isolated case.?
Ganesh Natarajan, chairman, National Association of Software and Service Companies (Nasscom), shares his sentiment. ?It is an indication that the government needs to bring in more stringent corporate governance laws and ensure their enforcement,? he suggests.
The fact that the sequence of events emerged from the company and not through an external agency is seen as the silver lining. Deepak Ghaisas, former CEO, India Operations, and CFO of I-flex Solutions, says, ?For IT companies, clients are largely driven by relationships and the mindset of the people towards the company. We hope that the entire industry is not looked at in the same light.?
Industry veterans feel that post Satyam, clients will not look at the level of service competence but insist on transparency especially at the board level. There were also concerns about the role of the auditor in the whole episode.
?It?s time to question the role and responsibilities of the corporate management, auditors, laws and policies,? says Kaustubh Dhavse, deputy director, ICT Practice, Frost & Sullivan, South Asia & Middle East. ?Nasscom will have to try very hard to paint a positive picture of the IT industry. The priority will be to help Satyam stand on its feet again, since it?s the stakeholders and employees who will have suffered the most. It?s not going to shut down for sure.?
Surinder Kapur, chief information officer, Delhi State Industrial and Infrastructure Development, feels that the Satyam controversy will definitely hamper the IT industry growth because it was a lead player in the market and a barometer to assess the overall IT market. The incident is bound to have a negative impact on Indian companies that are in the growing stage and are scouting for outsourcing clients abroad.
