Satyam arranges finances to end of Q1
Satyam board says finalizing arrangements to cover costs until end of March, but no new CEO or CFO selected yet
The government appointed board of Satyam failed to reach a decision on appointing a new CEO, CFO and a bank to provide financial advice on Friday, although the troubled services giant says it has enough funds to meet ongoing expenses.
The board met for two days last week, but postponed a decision on new appointees and banking advisor until this week.
In a statement from the company, board member Deepak Parekh said that the company is in the final stages of arranging funding that would cover operational needs until the end of March, with a formal announcement expected before 28th January.
The board also discussed ways to speed up payments and optimize costs the statement said.
Satyam clients have been calling for clarity on the company’s position going forward, although so far only State Farm Insurance and one other unnamed company have cancelled work with the company.
John McCarthy, principal analyst for Forrester Research, said 50 to 60 of Satyam’s major clients are developing contingency plans.
"Given the scale of their reliance on Satyam, they are scrambling to put in place contingency plans. They have to protect their mission critical systems,” he said.
McCarthy said that 80-90% of these companies already work with other Indian service providers, and it was likely that these companies would step in to take on accounts. He estimated that $500 to $700 million of business from Satyam could go to competitors such as Infosys, Tata Consultancy Services, Wipro, Accenture, and IBM over the next six months.
Also on Friday, India’s largest engineering company Larsen & Toubro tripled its stake in Satyam, in a move that the company said is intended to give it a greater say in the future of Satyam.
The company extended its share in Satyam from 4% to 12% in open trading, although its stake remains below the 15% level which would trigger a mandatory buy out offer under Indian regulations.
L&T is seen be many commentators as a possible buyer for Satyam. The company is the largest single stakeholder in Satyam, and with its own software subsidiary, L&T Infotech, and a blue-chip client base including 185 Fortune 500 companies across 70 countries, the business is seen as a good fit.
Y M Deosthalee, CFO of L&T refused to comment on possible buy out however, stating only that: “There’s a lot of corporate action happening in the company, we need to make sure we have a meaningful stake in Satyam to safeguard our interest. We have not made up our mind whether we want to buy the company.”