India's Satyam shares sink after govt bailout rejected
2009-01-15

Nations India Category Regions Regions Asia Maharashtra Mumbai Event 2008 Satyam Fraud Case Source (AFP)

MUMBAI (AFP) - Shares of fraud-hit Satyam plunged more than 30 percent Thursday after a company director rejected the idea of a government bailout for the Indian outsourcing giant.

"Taking money from government will send a wrong signal," Kiran Karnik, one of three new board directors named by the government, told the Times of India.

"The company will make profits within a few months," insisted Karnik, adding Satyam was still a "very viable organisation" despite the company's founder-chairman admitting last week to a billion-dollar fraud.

At the same time the company needed money to pay staff, Karnik, a former chief of the country's outsourcing lobby group National Association of Indian Software and Services Companies, was quoted as saying.

Shares in Satyam, India's fourth-largest technology company by revenue, fell 9.55 rupees or 31.3 percent to a day's low of 20.55 in early trade on the back of Karnik's remarks, dealers said.

Media reports had estimated the government might have to inject around 400 billion dollars into Satyam to keep it operating and ease worries of clients rattled by one of India's largest corporate frauds.

Shares in New-York listed Satyam have plunged more than 80 percent since B. Ramalinga Raju's dramatic confession last week that he had falsified Satyam's accounts by more than a billion dollars.

"Satyam could re-emerge stronger on its own with its existing clients, backed by a skilled workforce," Karnik said.

At the same time, Karnik said the firm needed funding to meet working capital requirements and pay staff next month. Raising funds from equity partners and banks topped the board's priority list, he said.

"Our only concern is to keep the show going and hold on to the clients and the workers," he said.

Analysts say the company's survival hinges on whether it can retain its customers after news of the fraud that shocked corporate India.

The paper quoted Karnik as saying there was not enough money left in the bank after Raju confessed he had inflated bank deposits.

The rejection of government funding surprised some analysts.

"Rejecting a government's helping hand is surprising. I do not understand where the current board gets its confidence from," said Hitesh Agrawal, head of research at Mumbai's Angel Broking, told AFP.

Trade Minister Kamal Nath had said earlier that the government was considering ways to help Satyam.

Meanwhile, the company announced it was continuing "to search for suitable candidates for the chief executive and chief financial officer."

Satyam named two new audit firms Wednesday to restate its results after PricewaterhouseCoopers, which had audited the company's books, said its findings were unreliable.

Pricewaterhouse did not admit any wrongdoing but said it had relied on information provided by Satyam's management to prepare its audits.

The new board is working toward making Satyam financially viable before any merger or sale is considered, Karnik said.