January 7, 2009 / 4:40 PM / 11 years ago

European investors unfazed by "India's Enron"

ZURICH, Jan 7 (Reuters) - European investors remain upbeat about India despite an accounting scandal at IT company Satyam Computer Services SATY.BO that sent Indian markets tumbling on Wednesday.

Shares in the IT group fell almost 80 percent after founder and chairman Ramalinga Raju admitted inflating the company’s reported cash and bank balances by over 50 billion rupees ($1 billion). [ID:nSP387669]

While shaken by what has been dubbed “India’s Enron”, some investors say they will wait for signs of widespread malfeasance among Indian companies before deciding whether to change their investment policy on India.

“We won’t change our view of India, unless we find more evidence that there is a systemic problem and that’s not the view of our emerging markets desk,” said George Dallas, director of corporate governance at UK-based F&C Investments, which manages $90 billion.

Some investors do not think the scandal will have broader implications for corporate governance or transparency among India’s companies.

“Corporate governance in many emerging markets companies is actually better than in more developed markets. It has needed to be robust in order to attract capital,” said Christoph Avenarius, an alternative investments and emerging markets specialist at Credit Suisse.

But Jigar Shah, senior vice-president at Kim Eng Securities, told Reuters more companies in India are likely to come under scrutiny and there is a possibility that investments in India will be affected.

There are also likely to be some repercussions for the whole stock market, said Deepak Lalwani, director-India at London stockbroker Astaire & Partners.

“It’s a black day for India as far as governance is concerned. This is a bolt from the blue and is bound to raise questions about other companies as well and about corporate governance in India generally,” said Lalwani, who noted that the word Satyam means “truth” in Sanskrit. (Editing by David Cowell)

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