Some Frequently asked questions about the after-effects of Satyam Fraud

This is a detailed Research Report about Mr. Ramalinga Raju (Satyam). It Covers:

1. Mr. Ramalinga Profile
2. A Picture Gallery showing side-By-side News from 7 most published Newspapers in India
3. Latest on His Fraud
4. Some Frequently asked questions about the after-effects of Satyam Fraud
5. Jokes on Satyam Fraud

After Effects of Satyam Fraud – FAQs

If you have any questions, please ask here.

1. What is the effect of Satyam Fraud on Indian BPO Sector?

Ofocurse it will affect Indian Market a little bit. But i don’t think any other country has such a large pool of trained resource as India has.  China, Brazil and Pakistan are some choices, but none of them can compete India for their cheap and trained labour.

Also scandals in one or two companies doesn’t mean that whole country is corrupt. So i don’t think its gonna effect that much. I do not believe this fiasco will have longer-term ramifications for the Indian services sector, as long as Satyam’s creative accounting turns out to be an isolated incident and not a more pervasive problem across the sector.

However a small shift of 3% or 5% can take place.

2. What is the Future of Satyam?

Satyam’s existing customers will ask questions, but are unlikely to switch suppliers, unless Satyam loses a large number of crucial operational staff in the coming weeks. However, Satyam is now at a disadvantage in winning new business in the short-term as it struggles to shake off the current controversy. Plus, some customers renewing existing agreements will be evaluating alternative service provider options. Its new leadership needs to move fast to right the ship and placate corporate accounts, and likely prepare the firm for an imminent takeover – the firm’s stock just hit a new all-time low. With Satyam’s strength across software service areas, I believe potential suitors include HP, Wipro, IBM, and possibly Genpact, whose major investor, general Atlantic Partners, may want to marry Satyam’s IT services strength with genpact’s BPO offerings. etc. Satyam also has a growing BPO competency, largely centered on procurement and supply chain support functions, which increases its potential attraction to some acquisitive competitors, as few large service providers today have a strong supply chain outsourcing portfolio.

Economic Times (Jan 20, 2009)

Market participants and business consultants are not very hopeful of the fraud-tainted Satyam Computers finding a suitable buyer any

time soon. Even if it does, the company will have to be sold at steep discounted valuations, market analysts opine.

The newly-constituted six-member Satyam board, according to media reports, is scouting for a buyer for the troubled software company.

At 12:41 pm, Satyam Computer shares were trading 1.76% higher at Rs 25.95 on the NSE. The scrip has fallen over 15% over the past one week.

“At this stage we believe it is impossible for anyone (for analysts, fund managers or for corporate buyers) to put a value on Satyam. With its brand name damaged, clients considering leaving, staff on the lookout for jobs, large bank loans pending and litigation raging in at least three continents, the accounts providing no basis to value the company, we simply can’t see which corporate buyer will want to stick their neck out,” said Noble Group’s equities head Saurabh Mukherjea.

“Whilst management can try to sell the firm, credible buyers who will actually take control of this company in the foreseeable future will be hard to find. Bits and pieces of Satyam could be sold but buying the main body of this company with the tech world already in recession-mode could be a career-limiting proposition for a CEO,” Mr Mukherjea added.

ET, on Monday, had reported that Satyam’s financial position was not as bad as was initially apprehended. The company needs Rs 500 crore in the near term to pay vendors, employees and clear other outstanding. It has receivables of Rs 1,700 crore and audit firm KPMG, which has been appointed to review and restate the company’s accounts, has begun the process of writing to customers and verifying the receivables.

The responses so far indicate that the figure is genuine and the company should get this money. In addition, Satyam owns eight campuses in India, including a 130-acre campus at Hyderabad, and it should be able to raise money against these fixed assets.

“Enough people (corporate bodies) have shown interest in buying the company, thanks to Satyam’s numerous long-term project contracts and large client list. But these people are not very sure of buying out Satyam because of their window-dressed book of accounts and other statements. Potential buyers are scared of unseen financial liabilities,” said a Mumbai-based broker.

According to a Mumbai-based leading business consultant, the board will have to first straighten the financial accounts before deciding to sell the company.

“The buyer may ask for overall legal and liability indemnity as well, at the time of negotiating the deal. With respect to valuation, considering the nature of sale, the buyer will only agree for a highly discounted price for the company. The buyer, on his part, is facing reputation risk, client risk and profitability risk if he’s buying out Satyam Computers,” the business consultant said.