Bangalore: Shares of Mahindra Satyam rose more than 9% on Wednesday, a day after the technology firm agreed to pay $10 million to settle US probes into an accounting fraud that in 2009 became India’s biggest corporate scandal.
“Looking at the amount they have had to pay compared to the severity of the violation, they seem to have got away and this is reflected in the stock price,” said Arun Kejriwal, director of research firm KRIS.
Satyam, formerly called Satyam Computer Services Ltd, will settle US Securities and Exchange Commission charges it fraudulently inflated revenue, income and cash balances by more than $1 billion over five years.
Shares in the company were trading 6.7% higher at Rs75.30 in a weak Mumbai market after rising as much as 9.2% early.
The shares had gained 6.4% this year as of Tuesday’s close, helped by firm quarterly results and Satyam’s move in February to pay $125 million to settle US shareholder litigation arising from the fraud.
This compares with a 1.9% drop in the sector index during the same period.
“The uncertainties seem to be getting sorted out and it looks like the company would soon get back to doing just its core business,” Kejriwal said, adding he would buy the shares on any dips.
The founder and former chairman of Satyam, Ramalinga Raju, stunned investors in January 2009 when he said the company had overstated earnings and falsified assets for several years, in a fraud sometimes called “India’s Enron.”
This had led to a steep fall in the company’s share price resulting in the shareholder lawsuit.
Satyam, once India’s fourth-largest outsourcing firm, in February said its fiscal third-quarter net profit more than doubled from the preceding quarter on new orders. For the fiscal year ended March 2010, the company had posted a net loss of Rs130 crore.
Separately on Tuesday, Satyam’s former auditor PricewaterhouseCoopers also agreed to pay $7.5 million in record settlements of fraud-related charges by the SEC and the Public Company Accounting Oversight Board.