New Delhi: Board members of Satyam Computer Services Ltd, Deepak Parekh, chairman of Housing Development Finance Corp. Ltd, and Kiran Karnik, former president of industry lobby group National Association of Software and Services Companies, talked in an interview about the company they helped salvage, the way forward for it, and also their views on the new government and what should be its top priorities. Edited excerpts:
Next step: (from left) Deepak Parekh and Kiran Karnik. Parekh says independent directors need to be provided regulatory protection. Bharath Sai / Mint
A quick update on the Satyam’s restatement of accounts. There have been delays but are we any closer to seeing this process through?
Parekh: I don’t think we are hopeful of giving a restated balance sheet in the next month or two. It could take six months or so. It is a very long and tedious process, and even after six months, how accurate it is because records are displaced or destroyed, people have left, entries have not been made, bank statements are fraudulent; so you don’t even know what is the accuracy of it.
So we have to find some via media, where we can, at least restate to some accuracy and move on. We require the acceptance of the regulatory agencies like Sebi (Securities and Exchange Board of India) and SEC (US Securities Exchange Commission). So one will have to have a dialogue with Sebi and SEC (on whether) we can can shorten this time because we can’t keep on looking at the past.
Has this dialogue with the regulators begun?
Parekh: I think the dialogue has begun and we have had talks with the two accounting firms. The costs are very steep also of doing this because there are 50-60 people from the accounting firms, and the forensic experts are all from overseas, so they charge at overseas rates. So we have to bring costs down because again it impacts the bottom line of Tech Mahindra Ltd as they are now footing the bill.
Are you asking for a waiver from Sebi and other regulators?
Parekh: It is not a waiver. We are saying: can we do away with reinstating the accounts of the past, can we not do six years, can we do the last one year? I don’t think this issue has been brought up to Sebi or SEC yet.
One of the other issues that continue to be pending is the dialogue with Upaid Systems Ltd on the possibility of an out-of-court settlement. Where do you think things currently stand?
Karnik: Some discussions and things are done, so it’s probably...sub judice. I shouldn’t comment on it.
Because we have seen a spate of resignations following what has happened in Satyam, what is your biggest fear and apprehension at this point with regards to the issue of independent directors?
Parekh: If you want quality independent directors, we must give them protection—and protection not only by the form of our D&O (directors and officers) policy but even regulatory protection. Otherwise, you will not have independent directors join boards. The mood today is it is very difficult to convince an individual to join the board. Everyone wants to come in an advisory capacity and not on the board.
You have been part of several government committees, including the infrastructure financing committee. How optimistic are you given the global and internal context that the United Progressive Alliance will push forward game-changing reforms?
Parekh: Whether reforms happen immediately or reforms happen over a period of time, reforms will certainly happen. What we really need is faster implementation of projects, faster infrastructure projects, because the last two-three years many large projects have been stalled due to inter-ministerial issues. We need to break the logjam. We need to spend money on infrastructure.
So let’s talk about infrastructure financing. Your report to the government in 2007 suggested several measures. What to your mind would be a sensible, rational target to look at in terms of capital to finance our infrastructure deficit at this time?
Parekh: I think the 11th Five-Year Plan talks about $100 billion (around Rs4.75 trillion) a year; that’s $500 billion for five years. I think that’s a good enough number to begin with. Today, interest rates are low, liquidity is abundant, interest from foreign firms is enormous because there is no work for them. Commodity prices are at an all-time low. Capital goods manufacturers are also hurting because no one is booking orders. It can’t be a better time for India to build infrastructure. Now, we have to get our act together and I am optimistic that Manmohan Singh and his team will deliver.
In terms of getting our act together, what are the out-of-the-box ideas that you would hope to see in this budget?
Parekh: I don’t think we can expect miracles in 45 days. I don’t think there will be an increase in taxes but we understand that there is a huge fiscal deficit. So how do you tackle it? Either you raise taxes or you disinvest.
I think there will be disinvestments. This will boost sentiment and new issues may come to the market, new investment opportunities will bring foreign investors. So I think there is a lot to do. But do not expect miracles.