Hyderabad/Mumbai: India’s government held out the possibility of bailing out Satyam Computer Services Ltd, even as the new board underlined its plans to put the firm “back on track”.
Meanwhile, former chairman B. Ramalinga Raju sought to take the entire blame for the country’s biggest corporate fraud onto himself and his brother and the company’s former managing director Rama Raju; and the company’s former chief financial officer (CFO) Srinivas Vadlamani sought to blame everyone but himself for the accounting and financial irregularities at the company.
Passing the buck: S. Vadlamani has blamed everyone but himself. AP
On Monday, India’s apex body of accountants and audit firms, the Institute of Chartered Accountants of India (ICAI) said it would set up a committee to investigate the role of Satyam’s auditor, Price Waterhouse, an arm of audit and consulting firm PricewaterhouseCoopers.
One of the new directors appointed by the firm, Deepak Parekh, chairman of mortgage firm Housing Development Finance Corp. Ltd, said, “Only a restatement of accounts will show if the receivables have been overstated or if the debts have been understated.”
Also Read CFO Srinivas Vadlamani’s confession
Another, C. Achuthan, a lawyer who has served as the head of the tribunal that hears appeals against market regulator Securities and Exchange Board of India (Sebi), said the board is also aggressively looking for a chief executive and CFO for Satyam.
Kiran Karnik, the former head of software industry’s lobby group Nasscom, is the third director appointed by the government, which dissolved the company’s board on Friday, two days after Raju wrote in a confessional letter that he had fudged the company’s accounts to the tune of at least Rs7,136 crore.
Parekh said the government would soon appoint more directors after which the board would pick a chairman. He said it was the “prerogative of shareholders” to change the audit firm and that this could only be decided at a larger shareholder meeting.
Meanwhile, commerce and industry minister Kamal Nath said that since Satyam Computer Services needs money, the government could consider extending help. The government, he added, would consider “all aspects” of helping the crisis-ridden company because it was a question of saving jobs and an international Indian brand.
The new board also sought an extension in announcing the financial results of the company for the three months ended 31 December because it could take some time to restate the accounts.
One of Satyam’s peers and rivals, Infosys Technologies Ltd, will announce its results for the quarter on Tuesday.
In his statement to the police, given before he was sent to judicial custody on Friday, Raju said that “some of the board directors did not agree” with the idea of Satyam acquiring two companies, Maytas Infra and Maytas Properties, promoted by his family. This is the first time since the aborted 16 December deal to acquire the two firms for $1.6 billion (about Rs7,770 crore) that Raju has admitted the decision wasn’t a unanimous one.
Also Read B Ramalinga Raju’s confession
In the statement, a copy of which has been reviewed by Mint, Raju added: “Since about seven years we wanted to show more income in the accounts to avoid others from involving in company affairs and any possible hostile acquisition and hence, manipulated the balance sheet to attract more business and showed unavailable amount as available cash on hand.”
In a bid to acquit Vadlamani of the fraud, Raju said: “In this process, myself and my brother Rama Raju, who is the MD and CEO of the company, used to take decisions and instruct our chief financial officer to do as instructed.”
Vadlamani told the police that he “suspected something was wrong” with the accounts of the company.
Stating that he did not have full knowledge about the confession made by Raju last Wednesday to the board and later filed to the stock exchanges, Vadlamani said in his statement, a copy of which too was reviewed by Mint, that all issues related to the company’s bank deposits were handled by the Raju brothers.
“There are certain responsibilities like handling bank deposits that were directly handled by chairman and managing director. I was specifically asked not to look into that area of operations. They instructed me to take care of day-to-day operational matters.”
Further, he said his role in the audit of accounts was also limited to doing due diligence at the end of every quarter. “One week before the board meeting date, I used to be presented with the balance sheet, profit and loss accounts prepared by the staff working under me. Two days prior to the board meeting, I used to have a discussion with statutory auditors (PricewaterhouseCoopers), who used to share with me their audit findings; based on those findings I used to take comfort and certify accounts.”
The legal road ahead
A Hyderabad court posted for Friday hearings on the bail application of the Rajus and Vadlamani; petitions filed by the criminal investigation department officials of Andhra Pradesh seeking police custody of the three top officials of Satyam; and petitions filed by the ministry of corporate affairs and Sebi seeking permission to question the Raju brothers and Vadlamani.
S. Bharat Kumar, the counsel for the three, opposed the petitions filed by the ministry and Sebi because he claimed a statement from an accused in judicial custody could not be recorded. He said he had been given time till Friday to counter these petitions before the court.
Executives at search firms say several senior Satyam executives are reaching out to them in search of jobs. “In the last few days, around 20 executives at the level of vice-president, senior vice-president and business unit head have got in touch with us,” said K. Sudarshan, managing partner (India) of London-headquartered EMA Partners International Ltd, an executive search firm.
Salvage operation: Satyam Computer’s new board members (from left) C. Achuthan, Deepak Parekh and Kiran Karnik address a press conference in Hyderabad on Monday. Bharath Sai / Mint
A principal consultant at a leading international search firm said the company had been “approached by a number of Satyam’s senior executives, including the vice-president of the ERP (enterprise resource planning, a software that helps run companies) practice, the global head of the company’s energy and utilities practice, the senior vice-president of GE (General Electric Co., a customer) relationship (account), and the head of business intelligence and data warehousing”. The executive didn’t want to be identified.
However, Sudarshan said recruiters were waiting for the outcome of the investigations at Satyam before hiring anyone because they didn’t want to sign on any executive involved in the fraud.
“Even after final negotiations, a candidate from Satyam is being put on hold by a client,” he added.
Investors cheered the new board’s actions and Monday’s other developments on the Bombay Stock Exchange, where shares of Satyam gained 44.2% to close at Rs34.40 each. “Whatever happened today (Monday) in Satyam is because the old board has gone away,” said V.K. Sharma, head of research at Anagram Securities Ltd.
Realty, bank and technology stocks led the fall in the benchmark 30-share Sensex index, for the third consecutive day, as investors became concerned about corporate governance issues and exposure of financiers to associates of Satyam. Two of these associates, Maytas Properties Ltd and Maytas Infrastructure Ltd, pulled down some bank stocks on account of their exposures to the two firms. The Bankex, BSE’s banking index, fell 3.62%, or 194.58 points, to close at 5,186.78. India’s largest lender State Bank of India (SBI) led the decline, falling 4.86%, or Rs59.05, to close at Rs1,156.85. “Our exposure in Maytas Properties and Maytas Infra, both fund and non-fund, is less than Rs500 crore,” SBI chairman O.P. Bhatt told reporters on the sidelines of an investor meet in Gujarat. An SBI official, who spoke on condition of anonymity, said the bank’s exposure is actually Rs463 crore.
“It started with Satyam and now the concerns go beyond the company,” said Waqar Naqvi, CEO of Taurus Asset Management Ltd. “We expect things to be bearish over the next month. People are taking a close relook at their portfolios.”
Ravi Krishnan, Rajeshwari Sharma, Sangeeta Singh and PTI contributed to this story.