Nine months on, Satyam fraud still a riddle

Nine months after the Satyam scam, India’s biggest corporate fraud of $1.5 billion, the investigating agencies are yet to get their act together. On Sunday, corporate affairs minister Salman Khurshid said he was still awaiting the final report from accounting regulator Institute of Chartered Accountants of India (ICAI) on its version of how the fraud unfolded. “I don’t know why it (ICAI report) is not coming. I am not able to understand what the delay is about”, the minister told agencies.

But an FE investigation found out that the process of getting B Ramalinga Raju, former chief of erstwhile Satyam, to court to face final charges will take quite some time. This is because a lot of work is still pending with all the four agencies tasked to track the Satyam accounting fraud. These agencies are the Serious Fraud Investigation Office (SFIO), stock market regulator Securities and Exchange Board of India (Sebi), ICAI and the Central Bureau of Investigation (CBI).

So far, the only step taken by the government for Raju’s trail is the plan to set up a special court for Satyam in Hyderabad.

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Satyam unveils results

Barely days before Tech Mahindra’s open offer for an additional 20% stake, Satyam Computer Services made public the unaudited financial details that it had shared with bidders earlier. In a filing with exchanges, Satyam said soon after founder B Ramalinga Raju confessed to perpetrating a Rs 7,000-crore fraud in early January, the company lost about $183 million in contracts from 56 clients up to March 26.

However, Satyam says it received new business orders from 215 mostly existing customers with contract values totalling $380 million during the same period. The company had a bank balance of Rs 373 crore at the end of March 2009, but outstanding bank loans worth Rs 469 crore.

In the quarter ended December 31, 2008, the company had a PAT of Rs 181 crore on revenues of Rs 2,206 crore. Figures for the same period the previous year were not available for comparison. In January, Satyam had a PAT of Rs 4 crore on revenues of Rs 647 crore, and for February, it had a PAT of Rs 52 crore on revenues of Rs 637 crore.

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Satyam likely to ask for full bid amount in advance

The Satyam board, which is scheduled to meet on Monday to decide on the technical and financial bids for a 51% strategic stake in the beleaguered IT firm, is likely to ask the successful bidder to deposit in advance the money in an escrow account. According to government sources, even if a successful bidder emerges on Monday, the board would not announce its name. The board will, however, ask the successful bidder to deposit the bid amount for a 31% stake as well as the amount for the remaining 20% to be acquired later through an open offer.

Sources said before announcing the name, the board would intimate the government as the board is a government-appointed one and a final decision regarding the buyer needs to be taken in consultation with the government.

As the bidding process is on, the Satyam board and the top management, in an effort to assure major clients about the continuity in management and that their interests would be protected, held conference calls with key clients over the weekend.

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Larsen and Toubro, Mahindra, Spice in race for Satyam

Larsen & Toubro (L&T), Tech Mahindra and the Spice group on Thursday submitted expressions of interest (EoI) to participate in the bidding process to acquire a 51% stake in Satyam Computer Services. Another major contender, the Hinduja group, backed out from the bidding process for reasons it did not disclose. Capgemini, Europe’s largest computer consultancy, also said it has no interest in buying a stake in the troubled IT company. The deadline for submitting an EoI ended at 5 pm on Thursday.

Satyam’s government-appointed board is keen to bring in a majority investor to restore the confidence in the company of its 50,000-strong staff and more than 600 customers, which include General Electric and Qantas Airways. Though the company was hit by India’s biggest corporate scandal, its top clientele and staff talent are seen as attractive to potential bidders. However, the class action suits in the US still hang like a Damocles’ sword over the company, with estimated liabilities of $400 to $800 million, according to Spice group legal advisors.

The Satyam board is meeting on Friday in Hyderabad to scrutinise the EoIs.

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Satyam sets no floor price for bids

Satyam Computer Services has announced the bidding modalities for acquiring a majority stake in the company, on a day when CBI got custody of its former chairman and suspected partners in the 7,800crore fraud.

Many interested parties are gearing up to take part in the ‘transparent’ bidding process after the Satyam management issued an expression of interest (EoI) on Monday. The earlier issue of knowing the financial position of Satyam has also been taken care of.

The EoI, issued after getting permission from the Securities & Exchange Board of India, sets no floor price for the bidders, though they will have to furnish proof of fund availability of at least Rs 1,500 crore.

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Satyam door opened to foreign bids: IBM, Oracle make queries

The government is keen to get a foreign suitor for Satyam. Minister for corporate affairs Prem Chand Gupta said in Hyderabad on Sunday the company’s government-appointed board has formally asked foreign companies to also bid.

While the minister did not disclose names, it is learnt that officials from IBM have met Satyam’s management team this month, to ascertain how long the restatement of accounts would take for the Indian firm. Oracle is also learnt to have sent some questionnaires to the Hyderabad-based IT company that imploded after its erstwhile chairman B Ramalinga Raju said he had engineered a Rs 7,800-crore accounting fraud in the firm.

The minister’s statement means the government is keen to get a very strong valuation for Satyam than was thought so far, with domestic engineering company L&T seen as the front runner. It already has a 12% stake in the IT company.

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Satyam names new Chief Executive Officer

The government-appointed interim board of Satyam Computer Services on Thursday selected AS Murty as CEO. Murty, who is currently chief delivery officer, has been with Satyam since 1994. He will draw an annual salary of Rs 5crore.

The six-member board also announced the appointment of Tata Chemicals former MD Homi Khusrokhan and Murugappa group former CFO Partho Datta as special advisors to the board. As Datta will oversee the company’s financial operations, the board decided not to appoint a separate CFO at this juncture.

In a statement issued after its two-day meeting, the board also confirmed a sanction of Rs 600 crore to meet the company’s working capital requirements.Satyam has been staring at an acute shortage of cash ever since the dramatic disclosure on January 7of a Rs 7,800-crore accounting fraud by Satyam founder B Ramalinga Raju.

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Hindujas join race for Satyam Computer

The number of suitors for the beleaguered Satyam Computer is increasing as Hinduja Global Solutions, an arm of the Hinduja Group, has evinced interest in acquiring the troubled IT company.

Company officials said that HGSL has sent a formal communication to Goldman Sachs, the newly-appointed investment banker for Satyam, saying that it is keen to participate in the bidding process as and when it starts.

The company has over$100 million in books and if required promoters Hindujas would also chip in, the officials said.

The Satyam board, which is meeting on February 5, is likely to take stock of such proposals.

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Satyam takes on political colour

Three weeks after the Satyam saga unravelled with its founder B Ramalinga Raju’s startling confessions, the story has begun to move from the regulators’ domain to the political landscape. On Wednesday, Andhra Pradesh chief minister YS Rajasekhara Reddy sent feelers to the Centre to transfer the Satyam fraud case to CBI if it is deemed appropriate. Accepting that the probe into Satyam’s affairs is ‘complicated’, Reddy reiterated that the present political context ahead of general elections has made the issue all the more sensational.

Even as the parliamentary standing committee on finance asked tough questions about the Reserve Bank’s earlier decision to revoke the suspension on audit firm Price Waterhouse, corporate affairs minister Premchand Gupta said the government will take a view on handing over the probe to CBI. He also said there has been poor coordination between the state police and the central investigating agencies in the case. Gupta said he had raised the matter in a recent letter to the Andhra CM. “I think there will be better coordination now,” he said in an exclusive interview .

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Ghost workers at Satyam

Just how many people does Satyam Computer Services employ? In June 2008,Satyam reported it had 51,643 employees on the rolls.The company’s website and government statements after founder & former chairman B Ramalinga Raju’s confessions put the number at 53,000. Minister of corporate affairs Premchand Gupta said last Friday that the only way to determine the actual staff strength was through the provident fund office.

According to the public prosecutor arguing the matter in a Hyderabad metropolitan magistrate court on Thursday, the number of employees is 40,000. FE learns that the last time Satyam filed its monthly returns to the Employees’ Provident Fund Organisation (EPFO), for the month of November 2008, the number of employees stood at 43,622.

For December,EPFO is yet to receive the PF contribution returns from the company, although the law mandates that contributions be deposited by the 15th of the following month.

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Raju:funds were given to Maytas

The Satyam Computer Services fraud grows murkier. According to police sources,former chairman B Ramalinga Raju has now confessed that he diverted Satyam funds to family-owned Maytas Infra and Maytas Properties since 2004. The two had earlier denied receiving any funds from Satyam.

The latest admission intensifies pressure on the reconstituted board to contain the damage, given that clients have threatened to ditch the be leaguered company. “Two large customers have given us notice on leaving.But there are others and many of them have indicated that they would like to renew and expand their contracts,” said Satyam board member Kiran Karnik.

On Thursday and Friday, the board will hear presentations on a potential buyout by a clutch of suitors. L&T is seen as the front runner in the race. Others, including IBM and HP, are also said to be in the reckoning.

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