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Fri 16 Jan 2009 07:24 PM

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No government bail out for Satyam

Indian government will not provide funds to support Satyam

The Indian government has ruled out providing a bail out package for services giant Satyam, amid reports that the company is firing staff to save money.

On Thursday, the Economic Affairs Secretary Ashok Chawla told reporters that: “The government at this stage is not looking at any direct support or bailout to the company.”

His statement was echoed by Corporate Affairs Minister, Premchand Gupta, who said that Satyam had not sought government aid, and that the new board would seek to raise cash from banks instead.

Kiran Karnik, one of the three new Satyam board members, also ruled out accepting government funding, saying this would send the wrong message about the company’s financial viability.

Some media had reported that Satyam was laying off staff to save money, but the company denied this.

Hansa Krishnamurthy Iyengar, an analyst at Ovum, wrote: “The financial situation at Satyam is indeed dire, with inside sources confirming that the company lacks sufficient working capital to meet current expenses and employee salaries for this month.”

In a separate note, Iyengar said that the “first challenge [for the new board is] to find a bank willing to risk supplying the necessary working capital to keep the business running.”

He added: “The best approach for Satyam at this juncture would be a takeover, as the company does not have the resources to function independently. It is also likely that the business could be broken up into parts and each sold separately.”

Iyengar pointed to Indian vendor, L&T Infotech, which he said has lagged behind in IT services, which might be a good buyer for Satyam. L&T subsidiary L&T Capital also acquired a 4% stake in Satyam shortly before the irregularities came to light. L&T management said it would continue to watch Satyam, but would not do anything until the real extent of Satyam’s liabilities was known.

On Wednesday, Price Waterhouse, Satyam’s auditors announced that its audit reports for Satyam from June 2000 until the quarter ended 30th September, 2008 could no longer be relied upon. Until the accounts can be restated, a process that could take months, analysts believe that banks or possible buyers will be deterred from investing in Satyam.

Full coverage

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Satyam reaching out to customers in Middle East

New board appointed to resuscitate Satyam

Satyam CEO and MD arrested

Satyam chairman admits falsifying accounts

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Roland 11 years ago

I believe Investors should look at Satyam's business model and pay close attention to their timely deliveries and good customer satisfaction record. Furthermore, any merger or buyout with Satyam must be grounded in solid business practices, with a staunch framework, not to be deterred from, without ANY penalties IF the company goes awry. The members of the board MUST be diligent in their work and make sure there is a solid company base to work with because ultimately it is good HUMAN RESOURCES that make the company succeed.

Maleah L. 11 years ago

In the present financial climate large corporations in a broad range of industries are responding with plans and announcements of workforce layoffs. Individually, each decision is rational — even if collectively the effect is to accelerate the downward spiral in the economy. Absent coordinated actions, the results could be catastrophic. The unemployment picture took on an even more ominous tone this week as new layoffs emphatically underscored a worsening global economy. Now, fear is rising that the losses represent a major restructuring in the business world and that some, if not most, of the jobs are gone forever. The Government financial bailout that has been approved for the financial industry, about $700 Billion, is about half gone, and no one has been keeping track of it. Online payday loans go straight into your account and you know about it, but in this case $350 billion is gone, and no one tracked just where it went. Barack Obama promises the remaining funds will be tracked. Online payday loans are kept track of, so let us hope this other $350 billion will be too. Read more about it at the Personal Money Store payday loans'n'things money blog.