Mumbai: More than a year after Satyam Computer Services Ltd emerged at the centre of the largest fraud in Indian corporate history, its new avatar Mahindra Satyam has scored 6/10 in a first-of-its-kind external assessment.
The evaluation, “The Satyam Saga—First Anniversary Report”, was carried out by technology market researcher Forrester Inc. on the basis of interactions with executives of the information technology services company, current and past clients and independent assessments by analysts.
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Hyderabad-based Satyam lost business worth $800 million-$1 billion (Rs3,632-4,540 crore), Forrester said, in the immediate aftermath of a Rs7,136 crore accounting scam revealed by its founder B. Ramalinga Raju on 7 January 2009.
Despite the loss, it has managed to break even and is likely to earn a thin profit margin, Forrester’s 5 March study noted.
Although Satyam’s legal problems, accruing from the fraud, are unlikely to have as much impact as initially feared, the report warned that continuing attrition levels of around 25% may affect the firm’s ability to deliver services to its clients.
But Satyam’s chief executive and board member C.P. Gurnani, when contacted, said the firm is stable and comfortable with the management’s efforts to transform its business. He also said the company was now cash-positive”.
“Between 17th of December (2008) and 13th of April (2009), we did lose some clients, everybody knows that. And in January, people were giving Satyam zero out of 10. So you will agree that even getting to six has been a long journey,” Gurnani said.
“In the business transformation journey that we are engaged in, there is (a) fair amount of work yet be done, but we are well on our way,” he added.
On 16 December 2008, Satyam made a failed bid to acquire Maytas Infrastructure Ltd and Maytas Properties Ltd, promoted by Raju’s sons, for $1.6 billion—causing an investor outcry and leading to a slide in Satyam’s shares on the Bombay Stock Exchange (BSE). They crashed further after Raju admitted the fraud three weeks later.
Tech Mahindra Ltd took over the firm after acquiring amajority stake on 13 April through a government-mediated auction.
Satyam’s shares, which hit an all-time intraday low of Rs11.50 on 9 January 2009, closed at Rs100.50 on BSE on Monday.
Even though the firm has held up better than most people expected, it has lost critical time in pursuing innovation and keeping pace with the competition vis-a-vis “next generation IT services capabilities”, principal analyst and lead author Sudin Apte noted in the Forrester study.
“Preoccupation with survival issues coupled with limited cash on hand is preventing the firm from investing in next-gen IT services capabilities such as developing IP (intellectual property)-based solutions, ramping up onshore and near-shore delivery centres, building platform-based managed services, and launching new SaaS (software as a service) or cloud-based offerings,” he added.
Gurnani, however, said this was not true, citing the presence of “heavy hitters” such as A.S. Murty, whose sole responsibility is to identify opportunities for innovation and investment in new technology.