MUMBAI // A year after the founder of Satyam Computer Services was arrested and its entire board replaced in a fraud scandal that rocked India, there are indications the company's new owners have stopped the IT giant's decline. After much financial upheaval following the shock revelation, the company accounts are now said to be "cash-flow positive".
The firm has added 35 new clients, increasing its total to 380 since it was acquired last April by Tech Mahindra, a joint venture of British Telecom and the Indian conglomerate Mahindra and Mahindra. Significantly, the new incarnation has managed to distance itself from the disgraced founder and chairman of Satyam, Ramalinga Raju, who has been in custody since he admitted to the biggest fraud in India's corporate history.
"According to our survey, people, in their minds, have dissociated Satyam from its founder," said Chander Prakash Gurnani, the chief executive of Mahindra Satyam, as the firm is now called. The company, he added, was "back in business" and chasing deals worth more than US$50 million (Dh183.6m). Analysts said this was good news not just for Mahindra Satyam, but Indian's entire IT industry, whose image as an outsourcing powerhouse was tarnished overseas by the fraud.
It all began in January last year, when Mr Raju confessed to concocting key financial results of the company "for years", while also overstating revenues and bank balances by $1 billion. According to the Central Bureau of Investigation (CBI), the national anti-fraud agency, retail and large institutional investors lost 140 billion rupees (Dh11.14bn) in the fraud. Soon after Mr Raju's confession, the Indian government, in a damage limitation exercise, swooped in to rescue the firm.
It replaced Satyam's 10-member board with six government-appointed experts from banking, corporate governance, IT and financial services. The firm lost some big clients, including Coca-Cola and GlaxoSmithKline following the confession. In a bid to halt a feared mass exodus, the new board swiftly began fire fighting by talking to remaining clients and its own employees to restore confidence. Clients were assured the company would assist them in switching to another IT vendor if it did not deliver.
The board then hired the accounting firms KPMG and Deloitte to undertake the task of restating accounts, which is expected to be completed this year. It also set out to find a buyer for the firm. Tech Mahindra, which had been considering a takeover of Satyam before the scandal, beat rivals including Larsen and Toubro, with a bid of $585m. When Mr Raju's trial finally begins, further wrongdoing by the fallen chief could be revealed.
Last November, Bloomberg reported that CBI investigators had unearthed 28.09bn rupees of additional fraud, on top of the 71.36bn rupees Mr Raju admitted to in January. Mr Raju is to be tried along with nine other suspects, including two auditors from PricewaterhouseCoopers who are allegedly complicit in the fraud. Meanwhile, Mahindra Satyam is seeking an end to the eight-year ban imposed in September 2008 by the World Bank for allegedly providing World Bank staff with improper benefits.
@Email:achopra@thenational.ae
