Hyderabad: The new board of beleaguered Satyam Computer began its meeting here on Saturday. The government-appointed board will have to address immediate funding needs of the cash-strapped firm as its top priority, after talk of a state rescue bid was rejected both by the government and the company.
Satyam, India’s No. 4 software services exporter, has been battling for survival since chairman Ramalinga Raju suddenly resigned last week, revealing profits had been falsified for years and that $1 billion of cash on the books did not exist.
Media speculation of government aid had mounted as analysts questioned whether India’s biggest corporate fraud had left Satyam with enough money to pay its 50,000 staff.
17 January | Mint e-paper
But economic affairs secretary Ashok Chawla said on Thursday the government was not looking at any direct support for the company or bailout “at this stage.”
Deepak Parekh, a senior banker and Satyam board member, said it had Rs17 billion ($350 million) in receivables and may not need new funding if the money came in on time, adding that the firm would consider bank loans if necessary.
But the Business Standard newspaper on Saturday cited company affairs minister Prem Chand Gupta as saying Satyam’s net receivables would be Rs11 billion, as it had forex losses of Rs2 billion and debt of 2 billion each from Citibank and BNP Paribas.
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“When your salary bill is about Rs5 billion a month, you certainly need money. Your only asset is your manpower, if you don’t pay them in time, they will leave,” said Rajesh Agarwal, director at CDEquisearch, who felt pledging Satyam’s assets to get bank loans would be a viable option for the short term.
“A government bailout would have set a wrong precedence.”
The government, which dissolved Satyam’s previous board last week, appointed three new directors on Sunday and another three on Thursday to help steer the company out of crisis.
Also Read Brief profiles of the new directors
“When you have such eminent people on the board, everybody expects them to take swift action. They can build Satyam from scratch, though it will take time for a full revival,” Agarwal said.
The board has tasks to appoint a new CEO and a CFO to bring the company’s operations back to normality and set a date for the company’s third-quarter results. Satyam has hired KPMG and Deloitte as its new auditors and Parekh has said financials would be restated in 8-12 weeks.
Also Read Raju’s confession
The new board also will have to keep clients from defecting to Satyam’s rivals, fend off a growing number of lawsuits over the scandal and try to rebuild investor trust.
Minister Gupta has said the first impression from the new directors about the company was that its operations were sound and that “by and large” major customers were willing to remain with the firm, while Satyam has said its senior management had started meeting clients to reassure them about the developments.
Satyam’s shares climbed 27.1% to Rs25.80 on Friday, but the stock is still down more than 85% since the massive fraud was revealed.
Satyam’s founder Raju, his brother who was the managing director of the company and the former chief financial officer have been charged and are being held in a jail.