Liquidity crunch looms, CFO resigns, lawsuits filed against company while founder drops off radar
By AMIT ROY CHOUDHURY
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(SINGAPORE) The scandal that has enveloped Satyam Computer Services now threatens to spiral out of control with a liquidity crisis looming and confusion spreading over the where- abouts of its disgraced founder and former chairman B Ramalinga Raju.
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| Taking flak: Interim CEO Ram Mynampati, at a stormy press conference yesterday, insisted that Satyam's other top officials had no knowledge of the scam |
A day after confessing that books had been cooked as part of the US$1 billion fraud and that he was ready to face the law of the land, Mr Raju dropped out of sight. His lawyer claimed he was still in India but the Indian media variously quoted sources as saying that he had flown to Texas or even Dubai. The man who had been one of India's most high-profile tycoons was nowhere to be seen yesterday.
To the management stuck with keeping the day-to-day operations going, Mr Raju's whereabouts were the least of the problems. Apart from facing a slew of lawsuits trying to hold on to its customers (who include more than a third of all Fortune 500 companies), it confessed facing a liquidity crunch.
At a press conference in Hyderabad yesterday, interim CEO Ram Mynampati noted that even though money for December salaries as well as payment for vendors had been arranged, there was 'no clarity' at the moment on where the money would come from for January.
'As of today, I do not know but I will hopefully know within a few days,' Mr Mynampati told reporters at what was a very stormy press conference.
According to some analysts, the monthly wage bill for Satyam's 53,000 employees would amount to around 6-7 billion rupees (S$180-210 million). And taking other operating expenses into account, it would need a cash kitty of around 10 billion rupees to tide over operating expenses in January.
'It remains to be seen as to whether they have that kind of cash in hand, given their liquidity crisis,' analysts said.
Mr Mynampati noted that the company would take steps to ensure cash flow from its customers. However, analysts wondered whether, given the tight financial conditions across the globe, this would be feasible.
At the press conference, Mr Mynampati announced that the company's chief financial officer, Srinivas Vadlamani, had sent in his resignation yesterday morning. His resignation is yet to be accepted and will be considered at the Satyam board meeting slated for tomorrow though it was generally accepted that it would deal a further blow to the company's efforts to stagger back to its feet.
Mr Vadlamani joins Mr Raju and Satyam managing director Rama Raju in resigning from the company.
Mr Mynampati said that neither he nor any member of the committee now running Satyam had any idea about the whereabouts of Mr Ramalinga Raju.
The committee now in charge consists of the top 10 leaders of the company. It has launched an immediate action plan to ensure business continuity and leadership transition.
Among the leaders is Singapore-based Virendra Aggarwal, the company's senior VP in charge of Asia Pacific, Middle East, India and Africa (MEIA).
Speaking at the press conference, Mr Aggarwal noted that the moment the news broke Satyam reached out to its customers.
'Our customers have shown that they are willing to stand by us, as have our employees,' Mr Aggarwal said.
Mr Mynampati noted that the company will have to announce the third-quarter results by the end of this month. It is likely that the Q3 results could be finalised after the board meeting tomorrow .
He added that the company will relook the Q2 results and is likely to restate the accounts for that quarter.
Mr Ramalinga Raju in his letter on Wednesday had stated that the operating margin of the company in the quarter was 3 per cent instead of 24 per cent, as stated in the balance sheet.
Mr Mynampati said that the company was reaching out to all its customers (among others, it is the official IT partner to the FIFA 2010 football World Cup) as well as its employees to assure them that business would continue and that it would try to save jobs.
The company was also trying to ascertain its actual cash position - including a possible independent audit - and was also assessing the role of its auditor, PricewaterhouseCoopers (PwC), to find out how the irregularities in accounts went undetected for so long.
'We will also take a decision on whether we need to change auditors,' said Mr Mynampati.
Indian authorities, including the Securities and Exchange Board of India (Sebi), have meanwhile started their own probe. Some company officials were questioned yesterday while the company's stock was struck off the benchmark share index, Sensex.
Mr Mynampati insisted that the company's other top officials had no knowledge of the scam - a claim that came under fire from the Indian media.
Meanwhile, lawsuits have been filed against Satyam - which is also listed on the New York Stock Exchange (NYSE) - on behalf of American investors. The lawsuits charge the company with fooling investors, infringing securities laws and manipulating books of accounts.
As the company battles its fires, there is speculation that it could become a takeover target.
Meanwhile, the Asian unit of UK fund manager Aberdeen Asset Management - once Satyam Computer Services' largest shareholder with a 9.2 per cent stake - said yesterday it no longer held any shares in the beleaguered Indian IT outsourcing firm.
NYSE has, in the meantime, halted trading in Satyam shares.
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