Satyam running out of cash to pay salaries, says CEO
Calling the fraud perpetrated by Satyam chairman B. Ramalinga Raju a “crisis of unimaginable proportions”, acting CEO Ram Mynampati admitted that the company had no cash “as of now” to pay its 53,000 employees in January, reports Ashok Das.Satyam sinks | Anatomy of fraud | See graphicsindia Updated: Jan 09, 2009 01:22 IST
The financial position of Satyam Computer Services appears to be far more serious than earlier thought. Calling the fraud perpetrated by its founder-chairman B. Ramalinga Raju a “crisis of unimaginable proportions”, acting CEO Ram Mynampati admitted on Thursday evening that the company had no cash “as of now” to pay its 53,000 employees in January.
“We have to make some outstanding payments to vendors... we are verifying the liquidity position and have to raise our liquidity levels in the near term. We are confident of being able to meet these commitments,” he said, at a press conference.
In the immediate aftermath of the crisis, Satyam is reaching out to customers across the world to seek their continued support.
“Our top 100 clients account for 80 per cent of Satyam’s revenues,” he said, adding that the top priority will be to clear pending contracts and continue with the business as usual.
Some key clients of Satyam, however, are understood to be meeting in Hyderabad to assess the current status of the troubled IT-major and to review their projects with the company.
The interim management will also pursue the option of M&As in a bid to resuscitate the company. Mynampati said Satyam would hire a new investment bank.
DSP Merrill Lynch, which Satyam had appointed as advisor for this purpose last month, terminated the relationship on Wednesday after it found accounting irregularities on Satyam’s books.
Incidentally, the company’s chief financial officer, V Srinivas, has resigned, though his resignation has not yet been accepted. “We will put it before the board when it meets on January 10,” Mynampati said.
Meanwhile, a special team of the Securities and Exchange Board of India (Sebi), headed by its Southern Region General Manager A. Sunil Kumar, on Thursday, began its investigation into the Satyam fraud.
“We have initiated the investigation process. The team will look into the details of the issue,” a senior Sebi official said.
The Press Trust of India reported that the Institute of Chartered Accountants of India (ICAI), the governing body for the profession, would serve a showcause notice on PwC in a week after collecting information from Sebi and the Registrar of Companies.
“We have written to Sebi. We are writing to RoC and collecting facts on Satyam. We are likely to issue showcause notice in a week’s time,” PTI quoted ICAI president Ved Jain as saying.
But in a statement issued during the day, PwC said: “Over the last two days, there have been media reports with regard to alleged irregularities in the accounts of Satyam Computer Services. Price Waterhouse is the statutory auditor of Satyam. The audits were conducted by in accordance with applicable auditing standards and were supported by appropriate audit evidence. Given our obligations for client confidentiality, it is not possible for us to comment upon the alleged irregularities. Price Waterhouse will fully meet its obligations to cooperate with the regulators and others.”
The ministry of corporate affairs, too, has ordered a probe into Satyam’s books of accounts and those of its eight subsidiaries/associates under the provisions of the Companies Act.
The companies whose accounts will be verified by the government are Maytas Properties, Maytas Infrastructure, Satyam BPO, Nipuna Services, Knowledge Dynamics, Nitor Global Solutions, Ca Satyam ASP and Satyam Venture Engineering Services.
“The government will take all necessary action to ensure these types of scandals do not take place again. Whatever steps can be taken will be taken,” Corporate Affairs Minister Prem Chand Gupta told agencies.
(With inputs from agencies)