Scandal-hit outsourcer Satyam Computer Services has appointed as its new chief executive an individual reportedly loyal to B Ramalinga Raju, the former CEO who admitted to manipulating its accounts.
The appointment of A S Murty, who has been an executive at the company for fifteen years and was most recently chief delivery officer, is likely to “disappoint the market and raise investors’ eyebrows”, the FT reported today.
“He comes as a surprise to the industry,” Gartner analyst Diptarup Chakraborti was reported in the paper as saying. “[Investors] might have wanted somebody without Satyam blood on his hands.”
But the appointment also fills a leadership vacuum, according to India’s National Association of Software Services Companies (Nasscom). Ganesh Natarajan, chairman of Nasscom, reportedly said it was a “good” move, providing “continuity”.
Satyam’s board said in a statement: “In our interactions over the past few weeks, we are convinced that Satyam needs an internal leader to steer it at this critical juncture.”
The new management may however only be temporary, until the company is sold to an investor, according to people close to the situation. The company would have chosen a powerful and well-known individual as CEO if the board intended to run the company as it is, said an analyst on condition of anonymity.
To retain customers, Satyam will have to address customers' concerns about the company's ability to continue to deliver services, analysts have said. The company paid staff salaries for January earlier this week from internal accruals, ending speculation that it may lose staff working on clients' projects due to an inability to make payroll.
B. Ramalinga Raju, founder and former chairman of Satyam, and two other key executives resigned in January, after Raju stated that the profits of the company had been inflated for several years.
The board also brought in two outsiders to act as special advisors to the new CEO and the board. It appointed Homi Khusrokhan, a retired managing director at Tata Chemicals, and Partho Datta, a chartered accountant with over 33 years of corporate experience, to assist in management and finance areas respectively. It appointed the Boston Consulting Group as management advisor, and Goldman Sachs and Avendus, an Indian investment bank, as investment bankers.
The new management appointments this week come even as the board said last week that it may consider a sale of Satyam to a strategic investor. In this context, the new management may only be a transitional one until the sale is finalised, according to analysts.
Some companies like outsourcers HCL Technologies and iGate have shown interest in investing in Satyam, although analysts say the process could be delayed as the extent of the financial scandal will not be known until the accounts are restated. Satyam also faces two class action lawsuits in the US.