Hyderabad: The board of fraud-hit Satyam Computer Services Ltd named a surprise choice as CEO and the company’s filings with the Bombay Stock Exchange (BSE) show that this person, A.S. Murty, a Satyam veteran of 15 years, sold around 40,000 shares he owned between 12 December and 16 December.
Hot new seat: A.S. Murty
Murty’s share sales, by themself, are in keeping with Indian laws, and were disclosed. Since 16 December, Satyam’s shares have been on a roller coaster ride downwards. They traded at Rs225.40 each on 15 December, and ended Thursday trading on BSE at Rs46.25 each.
List of Companies in Satyam Group (PDF)
Statement Showing Amount Outstanding from M/S. Satyam Computer Services Ltd. (PDF)
List of Individuals of Satyam Group (PDF)
T. Hari, head (global communications) at Satyam, said: “A.S. Murty did bring this to the notice of the board on Wednesday saying that his sale of shares could be pointed out. But then, the board made it clear to him that it was aware of his transactions and that those transactions were already validated by the regulatory agencies, including Sebi (Securities and Exchange Board of India). The board said since A.S. Murty was in no way related to Satyam’s finance department or mergers and acquisitions department, there was no chance for him to come to know of any price-sensitive information. Accordingly, the board invited him to take charge as new CEO of the company.”
The company, however, did not disclose this while announcing Murty’s appointment.
It was on 16 December that Satyam’s board approved a merger of Maytas Infra Ltd and Maytas Properties Ltd, both promoted by Raju’s family, with itself. The deal was abandoned the very next day following shareholder backlash.
Murty’s appointment came on a day when Australia’s largest bank, National Australia Bank Ltd, said it would suspend new outsourcing contracts awarded to Satyam. Murty’s appointment came a week after India’s corporate affairs minister Prem Chand Gupta told television channel CNBC-TV18 that Satyam’s new government-appointed board would soon appoint an outsider as CEO, except that he wouldn’t be designated that.
Meanwhile, documents reviewed by Mint show that there are at least 275 companies that are part of the so-called Satyam group—highlighting the enormity of the task before investigators looking into how and why the company’s books were fudged over the years to the tune of at least Rs7,136 crore, as admitted by former chairman B. Ramalinga Raju in a 7 January letter.
Interestingly, in the same letter, Raju had identified Murty, among others, as an “accomplished leader”.
Associate cos: Rs1,230cr
Meanwhile, mystery shrouds the Rs1,230 crore Raju claims to have raised as debt from associate companies to fund Satyam’s working capital requirements.
In his letter of 7 January in which he owed up to the fraud at Satyam, Raju wrote that he had provided the details of the money raised in a separate communication to the members of Satyam’s old board. This board was subsequently dissolved by the government.
Mint has reviewed this document, which shows that since November 2006, around 37 companies of the 275 that are part of the Satyam group loaned Rs1,425 crore to the company of which Rs194.60 crore was repaid.
It wasn’t immediately clear what these private companies do or ascertain their source of income.
Some of these firms that loaned money to Satyam also appear to be promoters in the company.
In its 6 January filing to BSE, giving details of pledged shares of Satyam sold by lenders, the software firm said that Bangar Agro Farms had borrowed Rs75 crore from DSP Merrill Lynch by pledging 3.9 million Satyam shares; and another Rs110 crore by pledging 4.7 million shares with Deutsche Bank.
Another of these firms, Amravati Greenlands borrowed Rs90 crore by pledging 7.4 million shares with DSP BlackRock; and Rs77.50 crore by pledging five million shares with HDFC Mutual Fund.
Class action response
Since 7 January, at least 20 class action suits have been filed in the US, where Satyam is listed on the New York Stock Exchange, by law firms.
Satyam announced on Thursday that a US-based law firm, Wachtell, Lipton, Rosen and Katz, has been appointed to represent it in the class action suits in the US.
Another law firm, Latham and Watkins, which has been Satyam’s lawyers for at least eight years, will assist Satyam in its continuing dialogue with US stock market regulator Securities and Exchange Commission (SEC), the company added.
A company spokesperson said that officials from SEC had met the members of the board in Hyderabad on Thursday.
Meanwhile, in the wake of India’s stock market regulator Sebi being granted permission by the Supreme Court to interrogate Raju and his brother and Satyam’s former managing director B. Rama Raju, the government’s Serious Fraud Investigating Office has approached a Hyderabad court seeking permission to interrogate the Raju brothers and Satyam’s former chief financial officer Srinvias Vadlamani.