Hyderabad: The government on Thursday ruled out a swift bailout for Satyam Computer Services Ltd, causing shares of the fraud-hit software company to plunge by 32%, and enlarged its board by appointing three more directors to steer it through the crisis.
Deepak Parekh, one of the three directors named earlier, said the company has Rs1,700 crore in receivables and would not need any financial help if the money comes through on time.
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“The government at this stage is not looking at any direct support or bailout to the company,” economic affairs secretary Ashok Chawla told reporters in New Delhi.
Satyam’s former interim chief executive officer Ram Mynampati, who is in the US to meet clients, had asked the government to provide Rs150 crore in assistance to help meet payments on health insurance for its employees based in the US, Chawla said.
Corporate affairs minister Prem Chand Gupta said Satyam had not sought any state aid.
“The company has not asked for any package. Three days ago a new board has been appointed. These (are) eminent persons. They are on the job,” he told reporters. “If they require funds, they will raise it from banks.”
The Institute of Chartered Accountants of India, the country’s main accounting body, has started proceedings against Satyam’s auditor Price Waterhouse, Gupta said.
Price Waterhouse, a unit of PricewaterhouseCoopers, said on Wednesday that its audit report could no longer be relied upon because it was based on Satyam’s financial statements that had been misstated.
The main Opposition Bharatiya Janata Party demanded a special parliamentary committee be set up to probe the Satyam scam. The panel “could be a select committee of the Rajya Sabha since the Lok Sabha tenure is going to end”, party spokesman Rajiv Pratap Rudy said..
Satyam founder B. Ramalinga Raju had on 7 January confessed that he had cooked the company’s books to the tune of Rs7,136 crore over several years, triggering India’s biggest corporate governance scandal and throwing the future of the country’s fourth largest computer services provider and its 53,000 employees into uncertainty.
Analysts said raising funds would not be easy until Satyam restates its financial accounts.
“(This) restatement will take anything between three-six months, and, until this is done, any financial aid for the company from banks or financial institutions is unlikely,” said Sudin Apte, country head of market researcher Forrester. “In that sense, the uncertainty for Satyam continues.”
Satyam’s shares fell Rs9.65, or 32%, to end at Rs20.30 on the Bombay Stock Exchange on Thursday while the exchange’s benchmark index, the Sensex, lost 3.5%. Satyam has lost 89% of its market value since Raju’s admission.
The government named Tarun Das, T.N. Manoharan and S. Balkrishna Mainak to the company’s board thus far comprising Parekh, chairman of Housing Development Finance Corp. Ltd, Kiran Karnik, former chief of software industry lobby Nasscom, and C. Achuthan, former head of the Securities Appellate Tribunal.
Das is chief mentor of industry lobby Confederation of Indian Industry, Manoharan a chartered accountant, and Mainak a senior official at Life Insurance Corp. of India with experience in risk management, among other fields.
The three were appointed two days before the board holds its next meeting, where it is likely to discuss the appointment of a chief executive officer and a chief financial officer for Satyam.
KPMG and Deloitte Touche Tohmatsu, appointed to restate Satyam’s doctored accounts, will complete the task in 8-12 weeks, Parekh said. Satyam won’t know how much it needs until auditors confirm assets and assess how much clients owe, he said.
“We are trying our best to salvage (the situation) and a large number of receivables are there. If it comes on time, then we can generate assets by hypothecating some assets,” Parekh told reporters.
Bloomberg, PTI and Sangeeta Singh of Mint contributed to this story.
Graphics by Sandeep Bhatnagar