Satyam turns the corner under new management
02 Jan 2010
When B Ramalinga Raju confessed to India's biggest corporate fraud on 7 January last year, most thought the scam had dealt a body blow to Satyam Computer Services, the highly successful outsourcing company he had founded.
However, a year later, the company survives albeit as Mahindra Satyam under its saviour, the tractors-to-software Mahindra group. Though the challenges of nursing a stricken company to health are by no means over, the company, under the new management, seems to have more than weathered the storm and its future as a going concern appears assured. The company has been able to even increase its client base and chart a fresh course, despite the rough weather it faced over the months.
The Satyam scandal came out in the open with Raju's letter informing the board that he had been falsifying revenue and profits for about six years to create a fictitious cash balance of $1 billion.
As the scam threatened to undermine international confidence in the Indian outsourcing industry, the government swung into action. The government was quick to step in and replace Satyam's board with leading Indian corporate stalwarts and troubleshooters, including banker Deepak Parekh, and Kiran Karnik, former head of the IT industry association Nasscom. Karnik was appointed chairman of the caretaker board.
The newly constituted board hired KPMG and Deloitte to start the long task of restating the accounts, which is expected to be completed in the first half of 2010. The board then set about dousing the fires.
Employee salaries were on the top of the list of priorities of the new board as they set about revamping the stricken company. The board appealed to clients to pay receivables early and arranged bank loans.
