India scraps Satyam board, to appoint directors
HYDERABAD, India (Reuters) - India's government on Friday dissolved the board of Satyam Computer Services and said it would appoint new directors as it sought to limit the fallout from India's biggest corporate scandal in memory.
Satyam chairman Ramalinga Raju, who resigned on Wednesday after revealing years of accounting fraud, which has called into question the future of the outsourcing company, will appear before the market regulator on Saturday.
Corporate Affairs Minister Prem Chand Gupta said the government would appoint 10 new members to the Satyam board, which would then meet within seven days. He said there was no move to take over Satyam's management as of now.
"The government is considering appointment of suitable persons as directors of Satyam," Gupta told a news conference in New Delhi. "We are determined to reach the truth but are equally concerned with the fate of employees and other stakeholders."
A Satyam spokeswoman said a statement from the company on the developments was expected later on Friday.
In a bid to ease the worries of rattled investors, the regulator, the Securities and Exchange Board of India, said auditors' certification of corporate results from the December quarter would be peer reviewed.
The government barred Satyam's board from holding its scheduled meeting on Saturday, which was called to consider likely options such as inviting a takeover or strategic investor and appointing an investment banker.
Analysts said Satyam's very existence was threatened by the scandal, which stand-in Chief Executive Ram Mynampati said has pushed the company into a crisis of unimaginable proportions.
Satyam shares slumped to 11.50 rupees (24 U.S. cents), their lowest since March 1998 and a far cry from a 2008 high of 544 rupees, before ending down 40 percent at 23.85 rupees ahead of the board's dissolution.
The company's market value has shriveled to $330 million, from more than $7 billion just six months ago.
FICTITIOUS CASH
The chief financial officer has also offered to resign after Raju's admission that profit had been overstated for years and that about $1 billion, or 94 percent of the cash and bank balances on Satyam's books at end-September, did not exist.
"There's a big question mark over everything. We don't know what kind of business model they have now," said Amar Ambani, vice-president of research at broker India Infoline.
"Raju's declaration says that at the operating level the margin was 3 percent, so at the net level it must have been a loss, which makes it extremely unviable. They have been borrowing to pay salaries, which means they have no cash at all."
The stock has fallen 87 percent in two trading days, pulling the broader market down. Shares in Satyam's main rivals, Infosys , Tata Consultancy Services and Wipro, rose on expectations they would pick up clients. Continued...
