Newly constituted Board of Satyam on Monday swung into action and decided to change top management, seek advance from clients and explore all options, including merger.
Newly constituted Board of Satyam on Monday swung into action and decided to change top management, seek advance from clients and explore all options, including
merger, to salvage the company which is hit hard by Rs 7,800 crore scam and the resultant liquidity crunch.
The government appointed board has already zeroed in on two accounting firms, one of which would be mandated in the next 48 hours to restate the accounts and work on third quarter results. The board also decided to appoint a new CEO and a CFO at the earliest.
At the same time, prime minister Manmohan Singh took a review of the developments of the company during his meetings with market regulator SEBI's chairman CB Bhave and top government officials and directed the Cabinet secretary KM Chandrasekhar to coordinate the action on the issue.
A day after they were put on the Board, Deepak Parekh, Kiran Karnik and C Achuthan went to the headquarters of the IT firm and took a first hand account of the situation in the meeting of the Board and took a number of decisions, crucial to keep the company afloat.
Announcing the steps to be taken over in the next few days, Parekh told reporters: "Our top priority is to restore confidence of customers, employees and investors by ensuring
business continuity."
Government would soon induct more members in the Board which thereafter would decide on chairman, he said. Meanwhile, Commerce and Industry minister Kamal Nath said in New Delhi that government was willing to consider all options, including financial support to the company.
Asked if merger could be considered to overcome the crisis, Parekh said, "The option of merger is always open". The board has also not sought any immunity for the company
from lawsuits.
After the first meeting of the three-member board, which also includes Kiran Karnik and C Ahuthan, Parekh said that the issue of "this enormity will need careful consideration and extended, meaningful review before it can be resolved".
He said working capital was an immediate concern for the company but added: "We have not yet determined the liquidity that is needed to tide over the present situation."
The board would ask the clients to pay advance against dues to tide over the immediate needs. Noting that there was a large number of receivables -- payments due from clients -- Parekh said: "If (receivables) come on time liquidity will be sufficient. But these need to be authenticated...
"Most of the clients are 'AAA' (top investment grade rated). So we can ask them for advance against receivables," Parekh said.
Asked if the board would approach banks for immediate fund requirements, Parekh said: "No bank will be willing to give credit line unless it looks at the authenticated."
The board is also seeking an extension for announcing the third quarter results beyond the scheduled date of January 16.
"...We have talked to two (auditing) firms and we are getting their proposals tomorrow after which we will appoint either one of them to look and restate the financials and
announce third quarter results," he added.
Asked whether the new CEO and CFO would be from within the company, Parekh said he hoped that in the next few weeks the board would find someone, but given the situation it would be difficult to find willing candidates.
The board would have to meet frequently in the next few months given the enormity of the issues at hand, he said, adding that the next meeting could be held within 48 hours.
Another member C Achuthan said that the board has not sought any immunity from lawsuits as such for the company, "but certain protection will be required otherwise the board would be unnecessarily entangled with the litigation.
"There is no immunity as such. But we enjoy immunity otherwise under the Company's Act because we are government appointed director."
About a dozen lawsuits have been filed in the US against Satyam, its founder Ramalinga Raju and his brother Rama Raju charging them with duping thousands of investors of billions of dollars.
Asked if PwC would be sued, Parekh said investigations were going on and it was too premature to comment on the issue.
"The auditors are appointed by the general body, by the shareholders, so we will have to wait till the next AGM to take a view on that, because it is the shareholders'
prerogative to appoint auditors," Parekh said.
On conflict of interest of two of the new board members, Parekh said: "All three of us have been appointed by the Centre keeping in mind all the aspects." He however announced that Kiran Karnik has resigned from the board of Satyam-AP Government venture, EMRI.
Achuthan said that the company needs to appoint a CEO and a CFO, as these were senior appointments, while adding that interim CEO Ram Mynanpati has ceased to be a whole-time director, but was continuing as an employee of the company.
"We need the right man for the right job and particularly at this juncture of time we need a senior CEO, who can bring normalcy to the company as soon as possible."
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