Indian outsourcing firm Satyam Computers was set Wednesday to report its first earnings results in nearly two years after a massive false accounting scandal rocked the firm, threatening its future.
Satyam’s shares rose as much as 3.6 percent to a day’s high of 102.45 rupees on Wednesday, outperforming the broader market, ahead of the announcement of earnings data, due after the market closes.
Now rebranded Mahindra Satyam after a takeover by the mid-sized software outsourcer Tech Mahindra, the company was due to report figures for the financial years 2009 and 2010.
The company is also in the process of restating its accounts for the last half dozen years to give a precise picture of the firm’s past performance.
Investors dumped the stock and clients melted away after Satyam’s former chairman B. Ramalinga Raju admitted overstating profits for years and inflating the company’s balance sheet by more than one billion dollars in January 2009.
Raju’s revelations marked India’s biggest corporate fraud and have been likened to the US energy giant Enron, which collapsed in 2001, also over false accounting.
Raju, who faces a slew of charges including conspiracy, cheating and forgery over the scandal, is free on bail after being released on health grounds by a court in the southern city of Hyderabad.
Analysts are divided on Satyam’s future, with some saying the worst is over for the fraud-hit firm while others argue it could take a “few quarters or even years” of uphill struggle to fully emerge from the scandal.
Citigroup expects Satyam to post net profit of 6.18 billion rupees (137 million dollars), on revenue of 52.14 billion rupees for the 2010 fiscal year ended March 31.
Satyam’s stock plunged more than 90 percent when the scam broke but recovered when a government-appointed board took charge and later chose Tech Mahindra as the new owners through a bidding process.
Satyam’s shares, however, are still 45 percent below their pre-crisis levels.
In April, Tech Mahindra, a unit of the tractors-to-holidays conglomerate Mahindra and Mahindra, paid nearly 600 million dollars for a majority share of Satyam.
Investors have been waiting for signs of recovery, particularly after the firm said last week it would delist from the New York stock exchange over fears it might not meet US reporting deadlines for its restated accounts.
Satyam has struggled to retain staff in the face of stiff competition from rivals such as Tata Consultancy Services and Infosys Technologies, which have both ramped up recruitment as demand for outsourcing increases.
“With predatory competition, client and staff attrition, and a damaged reputation, the combined entity faces an uphill struggle over the next few quarters, if not years,” CLSA analysts said in a recent report.
Satyam, ranked as India’s fourth-largest outsourcer by revenue when the scandal broke, acts as a back office for some of the world’s biggest companies including Nestle, General Electric and General Motors.
The firm operates in nearly 70 countries, with 690 clients including 185 Fortune 500 blue-chip companies and provided key logistics for this year’s World Cup football tournament in South Africa.
Source:http://www.google.com/hostednews/afp/article/ALeqM5gTlPEN23eU_k8Mq4BbAXLAVJEXjQ?docId=CNG.1ac7f0fdd081ded87e06e0276f2ee21c.101
