Indian IT outsourcing giant Satyam has reached agreement over two of its three acquisition-related disputes, reports indicate.

Caterpillar – yet to emerge from legal dispute with SatyamThe group’s troubles surfaced over a year ago when Chairman Ramalinga Raju admitted falsifying company results to the tune of 70bn rupees ($1bn) in an effort to forestall a takeover.

Three companies served legal notices seeking termination of asset purchases or requiring guarantees on payments due under their buyout agreements. Of these, US-based Bridge Strategy Group and Ghent, Belgium-based supply chain solutions firm S&V Management Consultants now say they have come to terms.

Doubt remains, however, about the group’s relations with and purchase of the market research and customer analytics business unit of construction giant Caterpillar, acquired by Satyam for $60 million in April 2008. Last June, it was revealed that the two firms were engaged in a legal dispute regarding non-payment – just $20m of the agreed $60m is said to have been paid to date. The companies ‘began negotiating to amicably resolve the outstanding issues’ three months earlier, the statement said, and settlement negotiations were then ‘at an advanced stage’. However Jim Dugan, Chief Corporate Spokesperson for Caterpillar, still says the acquisition ‘is an ongoing legal issue’, adding ‘our policy does not allow us to discuss the same.’

At the time of the acquisition announcement, Satyam said it would launch a business unit to provide research and analytics services globally to Caterpillar and other companies, and would ‘establish itself at the forefront of the substantial KPO market’ worldwide, with innovation centers in India, Europe, North America, Latin America and Asia Pacific.

Source:http://www.mrweb.com/drno/news11354.htm

Just over a year ago, in December 2008, one of the most dramatic investor conference calls in Indian corporate history took place.

Satyam Computer Services, the former flagship of the now-disgraced Indian information outsourcing tsar, B. Ramalinga Raju, had convened a call with fund managers to explain why he planned to buy out infrastructure companies belonging to his family.

The proposal to blow Satyam’s cash reserves during a global financial crisis on a family transaction without giving minority shareholders a chance to vote enraged India’s usually submissive institutional investors.

“You are putting the whole FDI [foreign direct investment] story of India at risk by adopting such third-grade corporate governance practices,” Pankaj Gupta of SBI Mutual Fund bluntly told Mr Raju.

Mr Raju, who a month later was arrested after confessing to defrauding Satyam, exposed governance shortcomings in India, and some rules were tightened in the aftermath of the scandal. Yet, according to institutional investors, India has some way to go before it can claim to have adopted international best practices.

A report by the Asian Corporate Governance Association, a Hong Kong-based advocacy group, to be unveiled in Mumbai tomorrow, makes recommendations on how to improve corporate governance in the country and narrow the gap with centres such as Hong Kong and Singapore.

“What we found in doing this report is that, in certain areas, India’s regulatory regime is weaker than we had thought,” said Jamie Allen, ACGA secretary-general.

Among the responses to the study, foreign and local institutional investors in India complained that they struggled to have their voices heard at company meetings. Notices of meetings can be published just days before the event and shareholders typically need to attend in person for their votes to be counted.

In developed markets, investors can far more easily appoint a “proxy” to attend on their behalf and can rely on the company to include their postal votes in any counts.

The report notes that the scope for misuse of warrants in India is “considerable”. These instruments allow holders to acquire stock on a specified date at a pre-determined price – usually set higher than the market price. However, in India, controlling shareholders (or “promoters”) can acquire warrants on a preferential and discounted basis – and so dilute minority shareholders.

One Indian shareholder lobby group last year brought the problem to the Bombay High Court to “expose a massive and orchestrated scam” by myriad Indian promoters which had issued warrants “for their personal aggrandisement”. The challenge was referred back to the market regulator, Sebi, which ruled that existing regulations were sufficient to protect minority shareholders.

On corporate disclosure, ACGA notes that companies do issue quarterly statements. But they only need to publish a full balance sheet or cash flow statement on an annual basis – although this may be raised to twice a year.

The structure of the audit profession, which lacks an independent regulator, also comes in for criticism. The strict caps on the number of partners and trainees that audit firms can employ are “a serious impediment to the development of individual firms”.

According to the report, it remains common practice for auditors to rely on bank account information provided by clients rather than independently verify the information with the bank.

Source:http://www.ft.com/cms/s/0/c85e0cda-03d1-11df-a601-00144feabdc0.html?nclick_check=1

The action of the Indian government following the alleged fraud case involving Satyam Computer Systems has saved over 50,000 jobs and the company from total collapse, said a senior Indian government official.

R. Bandyopadhyay, secretary of India’s Ministry of Corporate Affairs, said the government’s decision to remove suspects and put an interim setup to run the company’s affairs was the correct approach.

Bandyopadhyay, who was in Bahrain to attend a two-day seminar organized by the Institute of Chartered Accountants of India, Bahrain Chapter, said the Indian government has taken several steps to enforce strict corporate governance guidelines following the Satyam fraud.

He said the Ministry of Corporate Affairs is handling 760,000 companies in India. “The government is using the Satyam case as an eye-opener for the future as the Ministry of Corporate Affairs had organized India Corporate Week at the end of December. In addition, we have also organized 124 workshops and seminars across the country to create greater awareness for corporate sector companies and businesses,” he said.

Talking about the growth of the Indian economy, Bandyopadhyay said the Indian economy was also affected by the global crisis but not at the level that other countries are affected.

“We have seen the closing of 2009 very healthy and the growth is likely to reach 7.5 percent in the last quarter,” he said, adding the forecast for 2010 is likely to touch 7 percent, far ahead of many economies this year.

Through various actions, he said, we want inclusive economic growth, and steps like investors’ rights and responsibilities and online registration for investors are a few but very important steps to steer the corporate sector in the right direction.

Satyam is considered to be one of the leading outsourcing companies in India and was among India’s top five IT companies. The company employs about 53,000 people

Source:http://www.menafn.com/qn_news_story_s.asp?storyid=1093296731

When B. Ramalinga Raju confessed to India’s biggest corporate fraud on January 7 this year, most people thought the scandal would be fatal to Satyam Computer Services, the apparently hugely successful outsourcing company he had founded.

Yet, nearly a year later, the company survives – albeit with its name alongside that of the tractors-to-software Mahindra group, the white knight that saved it – in the form of Mahindra Satyam.

One sign that India’s fourth-largest information technology outsourcing company has weathered the storm is that it remains the IT vendor for Fifa’s World Cup next year in South Africa and the name Satyam remains as a sponsor on the international football body’s website.

The notoriety of the start of the year appears to have diminished too. “We did a formal survey of [the name]and we found that people in their minds have dissociated Satyam [from] its founder,” says Chander Prakash Gurnani, chief executive of Mahindra Satyam, speaking by phone while on the road in Delhi. Travel has been a big part of his life since moving from his post as head of international operations at Tech Mahindra, a joint venture with British Telecom.

Satyam’s retention of customers of Fifa’s standing is just one aspect of what must be one of the world’s most surprising corporate survival stories. In April, Satyam became one of the first big companies in Indian corporate history to be sold without any certified financial accounts.

While serious challenges remain – including the forthcoming results of a forensic audit, Mr Raju’s trial for fraud, and class action lawsuits in the US from investors in its Nasdaq-listed stock – its future as a going concern looks transformed from 11 months ago. It has even increased its client numbers.

What started as a potentially lethal development – not just for Satyam but for India’s multibillion-dollar IT industry, whose existence relies on foreign clients trusting its integrity – has also become a case study of successful government and private sector co-operation in India to solve a crisis.

The Satyam scandal began when Mr Raju told his board by letter he had been falsifying revenue and profits for about six years to create a fictitious cash balance of $1bn. He described the fraud, which he claimed was perpetrated merely to hide poor performance, as like “riding a tiger” – hard to get off without being eaten.

The ramifications spread. Manmohan Singh, India’s prime minister, realised the news could threaten international confidence in the nation’s outsourcing industry, which handles vital computer systems and business processes of huge numbers of customers half a world away. That presented a potential disaster for Mr Singh’s Congress party-led ruling coalition, which was preparing for a general election in May.

Mr Singh raised the issue in cabinet and replaced Satyam’s board with leading Indian businessmen, including banker Deepak Parekh and Kiran Karnik, former head of Nasscom, the IT industry association, who was appointed chairman of the caretaker board.

On a Sunday morning, days after Mr Raju’s letter,Mr Karnik was asked to join the board, and at 10.30pm met his fellow directors. “The first day, I felt like I was part of a bomb disposal squad, which was sent in not knowing too much about bombs and then deciding whether to cut the red wire or the white wire,” he says.

They hiredKPMG and Deloitte to start the long task of restating the accounts, which is expected to be completed in the first half of 2010. Next they set about putting out fires. If employees were not paid, they would desert the company, so the board appealed to clients to pay rec-eiv-ables early and arranged bank loans. They had to decide quickly which managers to trust. Few beyond Mr Raju’s closest circle seem to have been involved.

Mr Karnik appealed to employees’ courage in the face of adversity. “I said, ‘Look, this is a scam, it’s a huge scam – but it’s not a Satyam scam, as people say, it’s a Raju scam.’ ”

To reassure clients, the board offered to help them switch to another vendor if they were not satisfied with service levels, but most stayed. Mr Raju had, ironically, developed some of the highest service standards in the sector.

The board also set out to sell Satyam to a reputable owner within 100 days in order to pre-empt defections by clients, most of whom had a 90-day cancellation clause in their contracts. Goldman Sachs volunteered to arrange the sale.

Tech Mahindra was an early bidder. Mr Gurnani, who was was chosen to take over at Satyam because of his industry experience, especially in mergers and acquisitions, says Mahindra had been considering a takeover before the scandal. It beat rival Indian bidder Larsen & Toubro and US investment company Wilbur Ross, with a bid worth $585m.

Mr Gurnani has focused on healing wounds. Some big clients defected, but since the sale Satyam has lost three clients and added 35, to bring the total to 380. It is “cashflow positive”, he says, though he declines to reveal further figures until the accounts are restated.

To re-engage the young workforce, he has ap-pointed a nine-strong “shadow board” of employees to whom he “reports” every month. “I am not the CEO, I’m the chief happiness officer,” he says. He tells his staff: “I understand the [scarring] you’ve gone through. Let’s work together to redefine happiness.”

The scars, however, remain raw. Mr Raju had hired thousands of surplus staff and this month 8,500 were laid off. The workforce of about 50,000 in January has since dropped to “30,000-plus”, says Mr Gurnani.

Satyam faces further knocks when Mr Raju comes to trial, although the date remains uncertain. He and nine other suspects in the case are mouldering in jail, including two PwC auditors who have yet to be charged.

For Mr Gurnani, the task is to remove the last traces of Mr Raju’s legacy from the Satyam name. The former chairman’s plush penthouse suite at Satyam’s offices remains as he left it, unoccupied and unchanged. “It is known as ‘Raju’s room’ and no one sits in that room. Once we increase sales, we will probably convert it into a software development centre and make it productive,” Mr Gurnani says. Then, perhaps, Satyam will be purged of the Raju legacy.

Source : http://www.ft.com/cms/s/0/20112452-f41a-11de-ac55-00144feab49a.html