The three-member board of Satyam Computer Services outlined a formidable agenda that includes seeking a bailout, changes in the top management and asking clients to accelerate payments to overcome a cash crunch.
India's fourth largest software services company, whose founder and Chairman Ramalinga Raju confessed to manipulating accounts for several years last week, will also have to restate its accounts and appoint a new auditor within 48 hours to examine its books because its working capital requires "immediate attention," newly-appointed director Deepak Parekh told reporters, after the first meeting of the board.
"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."
The two other board members, Kiran Karnik and C Achuthan, were also present at the press conference.
Satyam's shares surged 45 per cent on the Bombay Stock Exchange on expectations that the board's rescue plan would prevent an exodus of clients such as General Electric and Telstra Corp. The software company's American Depository Receipts, however, plunged 88 per cent once trade was resumed on the New York Stock Exchange. Trading had been halted since January 7, when founder Ramalinga Raju admitted to overstating profits and assets for several years.
Parekh said a search is on for a new CEO and CFO, and the government will soon fill vacancies at the board that would later elect a chairman. Noting that there was a large number of receivables-- payments due from clients-- Parekh said: "If (the receivables) come on time, liquidity will be sufficient. But these need to be authenticated.
Board may ask clients for advances against receivables: "Most of the clients are 'AAA' (top investment grade rated). We are impressed with all these marquee customers that Satyam has, which reads like the who's who of global corporations. So we can ask them for advances against receivables," Parekh said, adding that the board has identified two independent accounting firms that are likely to make their proposals tomorrow.
A new independent accounting firm is expected to be in place within 48 hours to scrutinise the company's third quarter financial performance. The board is seeking an extension beyond the scheduled January 16 for this.
Parekh said he hoped that in the next few weeks the board would find someone. But given the situation it would be difficult to find willing candidates. "The top priority is to restore the confidence of customers, employees, suppliers and investors... Satyam has a lot of marquee customers, so the sustainability of service is a priority," he said.
Given the magnitude of the issue and the urgent attention required, Parekh said the board will have to meet frequently for the next few months.
Achuthan added that the board has not sought any immunity from lawsuits for the company. Asked if Price Waterhouse Coopers, the statutory auditors and auditing arm of PriceWaterhouseCoopers in India, would be sued, Parekh said investigations are on and it is too premature to comment on the issue.
To a question on reports that Satyam's money has been diverted to other entities, Parekh said the criminal law will take care of it and there are provisions in the law to retrieve the money.
Prime Minister Manmohan Singh today reviewed the Satyam developments during his meetings with Securities and Exchange Board of India Chairman CB Bhave and top government officials and directed Cabinet Secretary K M Chandrasekhar to coordinate action on the issue.
Singh will meet officials again tomorrow to discuss the future course of action on Satyam, said a finance ministry official. The meeting will discuss the state-owned banks' exposure in terms of loans given to the Hyderabad-based IT firm and its other related firms.
"The main concern is about loans given to the realty and infrastructure companies related to Satyam's promoter, and whether they are backed by proper assets," the official said.
Meanwhile, Commerce Minister Kamal Nath said the government was willing to extend financial assistance to Satyam should the newly appointed board ask for it. "The government is looking at all aspects. Many jobs are at stake here," he added. Finance ministry officials also confirmed that extending financial support is one of the options the government is considering.
Former CFO disclaims responsibility: Meanwhile, Satyam's former CFO Srinivas Vadlamani said in his statement to the police that the company's fixed deposits were unreal and fictitious and were managed through an understanding between the audit section and management. He also said the auditors never pointed to any "deficiencies" during their discussions.
"The bank deposits were handled directly by Raju," Vadlamani said. This was corroborated by Ramalinga Raju's statement that said, "Myself and my brother (former managing director B Rama Raju) used to take decisions and instruct our CFO to do as instructed". He admitted that the accounts were manipulated for about seven years.
Vadlamani has also accused his assistant Rama Krishna who has been working with him for about ten years. "Prior to quarterly board meetings Rama Krishna would prepare the balance sheet with the assistance of his team of internal employees. I did not pay much attention to the details of that balance sheet.
Raju said his decisions to manipulate the accounts were aimed at showing higher income and prevent a hostile takeover.
The bail applications of the Raju brothers were deferred for hearing to January 16. Sebi's application for recording Ramalinga Raju's statement was also deferred to the same date by a local court.