The company whose name translates as ‘truth’ turned into a symbol of every lie a corporate house could tell its shareholders.Rewind to Wednesday, when Satyam's chairman Ramalinga Raju quit after confessing to cooking his company's books for years. By the time markets closed that afternoon, Satyam had plunged 78%. Yet throughout, state politicians supported the company, state-owned finance companies turned a blind eye to its activities and a spineless board nodded off on everything. Satyam was rewarded with great valuations, a place on the Bombay Stock Exchange's Sensex A-list, and awards for entrepreneurial success, management skills.
MAYTAS DEAL | Weeks before he quit, Raju triggered investor fury by trying to use Satyam's fictitious cash to acquire two companies owned by his family. Investor anger eventually got him to back off.
WORLD BANK BAN | A few months before Maytas, the World Bank, whose IT network was managed by Satyam, banned it for eight years: the Bank found that spyware installed in its finance and HR software was transmitting every tap and click back to Satyam's operations in Chennai. Shortly before this, Upaid Systems, a US software company specializing in online payments for mobile phone companies which had outsourced work to Satyam, sued it. It alleged that Satyam's performance was shoddy, it had inserted a Raju relative on board, stolen patented ideas and sold those to two telecom companies.
On 7 January 2009, company Chairman Ramalinga Raju resigned after notifying its board members and the SEBI that he had falsified accounts.
Rescue Plans?
The best way to rescue Satyam from this situation is for the government to ask NR Narayana Murthy, former chief of Infosys, to take over as the CEO of Satyam. He is almost the only person with the capacity and credibility to rescue the company from its current plight. His reputation for integrity is formidable, so he is a rare individual who can quickly cleanse Satyam of the Raju taint. And since he no longer has executive duties at Infosys, he should be available for the task.
Satyam is still profitable. Even while confessing to cooking the books, promoter Ramalinga Raju said that Satyam’s profits in the last quarter were not Rs 649 crore but Rs 61 crore. The lower figure, representing a very low operating margin of 3%, is nevertheless a substantial profit, and is a perfectly good basis for survival.
The company can be saved if the government guarantees new bank credit to Satyam. That will enable the company to pay salaries till such time as the company’s books are fully investigated.
Cynics will say it does not matter if Satyam goes bust, since much of its business and staff will ultimately get redistributed to other Indian companies. But meanwhile much business will be lost, and many employee families will suffer tragedies. It is better to save the ship than just salvage something from the wreckage.
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Saturday, January 10, 2009
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