Satyam Computer Services today (8 January) reassured customers and investors that it could keep the company afloat, after its former CEO admitted to India's biggest ever financial scandal.
The Indian outsourcer is trying to improve liquidity on its balance sheet, Ram Mynampati, interim CEO at Satyam, told a press conference, but offered no details.
Following the admission of wholesale fraud by the former CEO, B. Ramalinga Raju, Satyam ervealled that real cash reserves were only 6% of the figure declared in September 2008, while profit margins were 3% rather than the 24% claimed, and revenues were 22% lower than initially announced.
Company executives were contacting customers directly to assure them of the continuity of Satyam's services, Mynampati said, even as the first legal action against the company was launched.
However, Sudin Apte, senior analyst at Forrester Research said, "The future of Satyam as an independent entity is in doubt now. With fraud running high and no clear visibility into availability of working capital and cash on hand, its clients and employees will have serious challenges."
Clients will start analysing their dependence on Satyam's resources, particularly for mission-critical applications such as running SAP applications, and decide on moving them in-house or to another service provider, Apte said.
Customers typically have more than one offshore supplier, reducing their dependence on any single supplier in the short term, he added.
Customers may also offer jobs to key Satyam staff working on their projects, either to work in-house or to transfer to another supplier, Apte said.
Meanwhile Ramalinga Raju, has gone to ground. "We have no knowledge of where Mr. Raju is," Mynampati said.
The company's board is scheduled to meet on Saturday, and before it can approve Mynampati's appointment, it will have to find new additions to the board, analysts said.
Mynampati insisted that he and other board members only received records that were audited and verified by the company's auditors, and had no knowledge of the fraud.
The auditors, Pricewaterhouse have amplified slightly on a statement they gave yesterday, saying “The audits were conducted by Price Waterhouse 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.”
In an effort to demonstrate stability at the company Satyan earlier today said that 10 of Satyam's most senior executives, and 40 regional managers, had pledged to stay with the company.