×
Home Companies Industry Politics Money Opinion LoungeMultimedia Science Education Sports TechnologyConsumerSpecialsMint on Sunday
×

Satyam offers $125 mn to settle US suit

Satyam offers $125 mn to settle US suit
Comment E-mail Print Share
First Published: Thu, Feb 17 2011. 11 58 PM IST
Updated: Thu, Feb 17 2011. 11 58 PM IST
Bangalore: Satyam Computer Services Ltd settled a lawsuit with US investors for $125 million (around Rs570 crore), marking another step in the rehabilitation of the company at the centre of India’s biggest corporate fraud that took place under the stewardship of founder B. Ramalinga Raju.
The settlement comes soon after the firm on 14 February reported a doubling of net profit to Rs58.9 crore for the three months ended December from the preceding quarter. The settlement amount is “lesser than the company had anticipated”, chairman Vineet Nayyar said.
The resolution removes a key hurdle to Satyam’s merger with Tech Mahindra Ltd, which acquired a 51% stake in the company in April 2009 for Rs2,889 crore, following a government-managed rescue plan.
“With this, most of the external litigations against us are over,” Nayyar said on a conference call. “The result would be all people falling in this class will be prohibited from suing us any further.”
Raju admitted to the fraud, which has been put at Rs7,000 crore (now estimated at Rs14,000 crore) by investigating authorities, in January 2009.
The stock rose as much as 6% on the Bombay Stock Exchange on Thursday, before ending at Rs63.60, up 1.52%. The exchange’s benchmark Sensex index closed at 18,506.82 points, up 1.13%.
“The only thing pending for the merger now is board approval,” said Nitin Padmanabhan, an information technology analyst at Indiabulls Securities Ltd.
Analysts said the worst might be over for the company given improved earnings, better utilization and net employee addition in the last quarter. The company posted a net loss of Rs1,250 crore for the year ended March.
The firm was well on track to achieve the three-year turnaround deadline that had been set immediately after the acquisition, Nayyar said at the February earnings announcement.
Thursday’s settlement doesn’t include another class-action suit led by Aberdeen Group Inc. “These investors are also a part of this class,” Nayyar said. “So we are hoping they will accept compensation for this class.” Even if the Aberdeen Group suit has to be resolved separately, Nayyar said the amount involved would be “nominal”.
Thursday’s settlement was for a group led by four institutional investors who served as lead plaintiffs: the Public Employees’ Retirement System of Mississippi, Britain’s Mineworkers’ Pension Scheme, Norway’s Skagen AS and Denmark’s Sampension KP Livsforsikring A/S.
It represented litigation by more than 20 different US investors and shareholders, consolidated into one.
Nayyar said the payout will not reflect on the profits of the company because it will be made entirely through cash reserves, which currently amount to Rs2,900 crore.
The settlement will be an exceptional item on the company’s profit and loss account, and will be put in an escrow account in a few days, he said.
If Satyam sues the erstwhile auditor, 25% of any proceeds from that litigation will go towards funding the settlement, the company said. Nayyar, however, declined to comment on when it will sue the firm.
The plaintiffs have accepted the tax liability in the settlement, as in the case of the December 2009 payment of $70 million Satyam had agreed to make to former client UPaid Systems Ltd. Satyam said it will make the payment after applicable taxes are deducted from $125 million.
Other litigation Satyam has to contend with is from the 37 firms floated by founder Raju. Raju, in his confession letter of January 2009 to the stock exchanges, referred to a net amount of Rs1,230 crore that he had arranged from these firms.
In addition, erstwhile infrastructure firm Maytas Infra Ltd had said in June that it had found documentary evidence that Satyam Computer was the ultimate beneficiary of around Rs324 crore of inter-corporate deposits issued by it. Satyam has previously said these claims were untenable.
“We are not currently in any dialogue with these firms,” Nayyar said on Thursday. He added that Satyam does not recognize any of the claims made by Maytas Infra (now part of IL&FS group).
Satyam has not made any payments to Indian investors affected by the fraud. When asked if it planned to do so, Nayyar said: “In India I don’t believe we have such laws, so that is not even under consideration.”
Reuters contributed to this story.
priyanka.p1@livemint.com
Comment E-mail Print Share
First Published: Thu, Feb 17 2011. 11 58 PM IST
More Topics: Satyam | B Ramalinga Raju | Vineet Nayyar | US | Home |