Satyam bailed out by Indian government

Satyam bailed out by Indian government

India's embattled Satyam Computer Services will get liquidity from the government, but may seek funds from banks and ask for early payments from clients in a bid to salvage the firm, a member of its new board said Monday.

The outsourcer will appoint a new accounting firm within the next 48 hours to work on restating the accounts, Deepak Parekh, senior banker and government appointed board member, said.

The issue of working capital requires immediate attention, said Parekh, who is also chairman of Housing Development Finance Corporation (HDFC), a home loan company in India.

The Indian government has promised immediate funds to help Satyam overcome the crisis and safeguard 53,000 jobs. It will also appoint new board members "soon."

But the amount of cash required to salvage the company is not yet clear, as the board has the task of sorting out accounts which have been falsified for years.

The working capital crisis may not be acute, according to Parekh. The company has large receivables due and minimal debt. But the board cannot plan salvaging strategies until it is sure the figures for the receivables and debt are correct, he added.

"The board will try to its best to help the company tide over the crisis," said Parekh, sitting beside fellow board members Kiran Karnik, former President of NASSCOM and C Achutan, Director at the National Stock Exchange. All three members were appointed to the board of the troubled outsourcing firm by the Indian government, in the wake of a billion dollar accounting fraud by chairman and founder Ramalinga Raju.

Parekh told press that the priority is to restore confidence and then restate accounts that the former chairman Raju admits have been falsified for years.

"No one has faith in the numbers being produced so far," Parekh said. "Unless the accounts are restated, the outlook for Satyam can't be the same."

"We want authenticated numbers and unless we get that, no bank is willing to give credit lines," said Parekh, adding that the board would meet frequently to figure out how to raise funds.

Parekh suggested that the outsourcing firm could offer its "Triple A-rated clients" some "incentives to get them to pay early."

"It is too early to say if there is enough money to pay salaries, or how we will raise money," he said.

Satyam is also looking for a new chief executive and chief financial officer. The board did not confirm Ram Mynampati, interim CEO at Satyam, would stay in the position. Instead, Parekh said, the board is interested in bringing in "fresh blood" for the management positions, and that will take some time, Parekh said.

"Few people want to leave a good job and come to a company with uncertainty, but we hope we can find someone in the next few weeks," said Parekh.

Another top priority for the board is to retain the prized clients of Satyam. But Parekh downplayed concerns that clients would leave the outsourcing firm.

"A lot of customers have been working with Satyam for quite a while, and would be reluctant to change," added Parekh. "Especially if changing suppliers involves moving mission critical work from one place to another. We've not heard a single customer raising the slightest doubt about staying on Satyam."

The scandal has rocked customer confidence in India's IT and outsourcing industry, which employs more than two million people.

But Parekh said this case would not undermine investor in India's entire IT economy. "This one unfortunate, tragic, colossal case, doesn't mean the IT industy as a whole is under a cloud. India is known for its strong, good corporate governance and I don't think that's in doubt," he said.

Former auditors Pricewaterhouse Coopers will not be allowed to audit Satyam, but the board members would not comment further on the ongoing investigation at accounting firm.

Asked if PwC would be sued, Parekh said investigations were ongoing and it was premature to comment.

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