Reuters : January 16, 2009
HYDERABAD, India: The Indian government is not considering bailing out Satyam Computer Services, and the fraud-damaged outsourcing company may have to turn to banks, many of them state-run, if it needs funding.
Satyam shares slumped by a third Thursday after Kiran Karnik, one of the new Satyam board members appointed by the government, ruled out accepting government money, saying it would send the wrong signal.
The software services exporter has been battling for survival since its founder, B. Ramalinga Raju, resigned as chairman last week, saying profits had been falsified for years and $1 billion in cash and bank balances did not exist.
"The government at this stage is not looking at any direct support or bailout to the company," the economic affairs secretary, Ashok Chawla, told reporters.
The corporate affairs minister, Prem Chand Gupta, also said Satyam had not sought state aid.
"If they require funds, they will raise it from banks," Gupta told reporters in New Delhi.
Karnik told the Times of India in an interview that Satyam was a financially viable company and would make profits in a few months.
He said taking government money would "send a wrong signal," after media speculation that the state would have to pump cash into a company that had imploded in the country's biggest fraud scandal.
The Times of India said raising funds from equity partners and banks was the new board's priority to meet working capital and pay staff salaries. A board meeting will be held Saturday, said another new board member, Deepak Parekh.
Analysts said raising funds would not be easy until Satyam restates its financial account. Satyam has appointed new auditors to examine the full extent of the fraud, find out how much cash it really has and restate its financial results.
This "restatement will take anything between three and six months, and until this is done, any financial aid for the company from banks or financial institutions is unlikely," said Sudin Apte, head of India operations for the market researcher Forrester. "In that sense, the uncertainty for Satyam continues."
Satyam shares closed Thursday at 20.30 rupees, or 41.1 cents, down 32.2 percent, dragging down the main stock index by 3.45 percent. Satyam's market value has dived to about $275 million from more than $7 billion in mid-2008.
The Indian government appointed three more Satyam directors Thursday, bringing the new board's membership to six.
The directors named Thursday are Tarun Das of the Confederation of Indian Industry; T.N. Manoharan, a chartered accountant; and Suryakant Balkrishna Mainak of the Life Insurance Corp. of India.
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