Page last updated at 14:27 GMT, Monday, 12 January 2009

Satyam rebounds on rescue hopes

Deepak Parekh
The new board members want to inject "fresh blood" into the firm.

Shares in Indian software firm Satyam have jumped 44% on hopes of a rescue plan for the scandal-hit firm.

On Sunday, the Indian government appointed three leading businessmen to the company's board.

The board has met to discuss the future of the firm, which has been at the centre of a scandal over the falsifying of accounts.

Meanwhile, the World Bank revealed that Satyam and two other Indian IT firms are on a business blacklist.

The Satyam scandal has undermined investors' confidence in India's booming outsourcing industry.

Deepak Parekh, a senior banker and one of the firm's new bosses, said that the firm would appoint a new accounting firm within the next 48 hours to work on restating the company's accounts.

"Our immediate priority is to ensure sustainability of services with minimum disruption," Mr Parekh said.

"We will provide strategic direction to Satyam, not run it on a daily basis. We are looking to induct fresh blood, like the chief executive and chief financial officer into the company, but it will take time," he added.

Shares in Satyam jumped 44.2% to close at 34.40 rupees after the stock lost 87% last week.

World Bank

India's IT sector was dealt a further blow after the World Bank said that three Indian firms, including Satyam, were on a list of- companies that are banned from doing business with the bank.

WORLD BANK BLACKLIST
Satyam barred for 8 years
Wipro barred for 4 years
Megasoft barred for 4 years
Source: World Bank

This was the first time the World Bank had disclosed the list of companies barred from receiving direct contracts under its corporate procurement program.

Satyam was banned in September 2008 for eight years and Wipro Technologies was blacklisted for four years from June 2007 for providing improper benefits to World Bank staff.

Wipro said it was banned for offering World Bank employees shares in its stock offer in the US in 2000.

Megasoft Consultants was banned for 4 years from December 2007 for taking part in a joint venture with World Bank staff while also conducting business with the Bank.

Shares in Wipro and Megasoft fell sharply on the news.

Arrests

The entire board of Satyam, a private company, had been sacked after its founder and former chairman had been arrested.

Ramalinga Raju and his brother Rama, also a former Satyam director, were arrested on charges including criminal conspiracy and forgery.

Mr Raju admitted last week that the firm had been falsifying its accounts.

He said the company had exaggerated its cash reserves by some $1bn (661m).

The other new directors are Kiran Karnik, the former boss of technology trade group Nasscom, and C Achuthan, a former member of the Securities and Exchange Board of India.

The company, which employs 53,000 people and enjoyed a turnover of $1.73bn last year, is now fighting for its life.

Its clients include Nestle, General Electric and Ford.

The Raju brothers have also been charged with criminal breach of trust and falsifying documents.

They have been remanded in custody until 23 January, and could face life in prison.

Indian police have also now detained Vadlamani Srinivas, Satyam's chief financial officer, for questioning.



Print Sponsor


SEE ALSO
India appoints new Satyam bosses
12 Jan 09 |  Business
Indian IT scandal boss in custody
10 Jan 09 |  Business
Indian IT scandal boss arrested
09 Jan 09 |  Business
India IT firm faces scandal probe
08 Jan 09 |  Business
Satyam scandal shocks India
08 Jan 09 |  Business
India IT boss quits over scandal
07 Jan 09 |  Business

RELATED INTERNET LINKS
The BBC is not responsible for the content of external internet sites



FEATURES, VIEWS, ANALYSIS
Has China's housing bubble burst?
How the world's oldest clove tree defied an empire
Why Royal Ballet principal Sergei Polunin quit

BBC iD

Sign in

BBC navigation

Copyright © 2019 BBC. The BBC is not responsible for the content of external sites. Read more.

This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.

Americas Africa Europe Middle East South Asia Asia Pacific