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Satyam head arrested

The chairman of Satyam Computer Services was arrested on Friday on charges of cheating and forgery, and the government dissolved the outsourcer’s board as authorities moved to limit fallout from India’s biggest corporate scandal.

Chairman Ramalinga Raju, who resigned on Wednesday after revealing years of accounting fraud, was expected to appear before India’s market regulator on Saturday.

In a late night development, Raju and his brother B. Rama Raju, Satyam co-founder and managing director, were arrested on charges of criminal breach of trust, criminal conspiracy, cheating, falsification of records and forgery, Reuters was told by S.S.P. Yadav, police chief of the southern Andhra Pradesh state, whose capital, Hyderabad, is home to Satyam.

Officials with India’s Registrar of Companies searched Satyam’s offices and seized papers and electronic documents, the company said late on Friday in a filing with the U.S. Securities and Exchange Commission.

Earlier, Corporate Affairs Minister Prem Chand Gupta said the government would appoint 10 new members to the Satyam board, which would meet within seven days. There was no move at this time to take over Satyam’s management, he said.

“The government is considering appointment of suitable persons as directors of Satyam,” Gupta told a news conference in New Delhi. “We are determined to reach the truth but are equally concerned with the fate of employees and other stakeholders.”

A Satyam spokeswoman said the company welcomed the government’s decision, which would restore the confidence of all employees, customers and shareholders. However, she said Satyam had no comment on the arrests.

In a bid to ease investors’ concerns, the Securities and Exchange Board of India said auditors’ certification of corporate results from the December quarter would be peer reviewed.

The government barred Satyam’s board from holding its scheduled meeting on Saturday, called to consider options such as inviting a takeover or strategic investor and appointing an investment banker.

Analysts said Satyam’s very existence was threatened by the scandal, which stand-in Chief Executive Ram Mynampati said has pushed the company into a crisis of unimaginable proportions.

Satyam shares slumped to 11.50 rupees (24 U.S. cents), their lowest since March 1998 and a far cry from a 2008 high of 544 rupees, before ending down 40 percent at 23.85 rupees ahead of the board’s dissolution.

The company’s market value has shriveled to $330 million, from more than $7 billion six months ago.

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January 10, 2009 Posted by | news | , , , , , , , | Leave a comment

Sathyam may be removed from Sensex,Nifty

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Satyam Computers may be removed from the Sensex and Nifty following the revelation of manipulation in the company’s accounts, analysts said.

Rajiv Mehta, senior analyst with India Infoline, a large brokerage house said his firm has immediately stopped covering Satyam and many other brokerage houses are also expected to do the same. There will not be any investor interest in the company anyway. The company may be removed from Sensex and Nifty, he said.

With the fall in its stock prices, Satyam has lost its weightage in the Sensex considerably over the recent past and currently has weightage of only 1.56 as of (Tuesday). While in Nifty, the weightage is only 0.63 per cent.

January 7, 2009 Posted by | news | , , , , , , , , | Leave a comment

Anil Ambani appears on Raju radar

Anil Ambani is emerging as the white knight who can spring to the rescue of B. Ramalinga Raju, promoter of the beleaguered Satyam Computer Services Ltd.

Raju clings to a small 5.13 per cent stake in the country’s fourth largest software exporter and a very shaky position as the chairman of Satyam heading into a crucial board meeting scheduled for January 10.

The Satyam promoters faced a shareholder revolt after an aborted plan to acquire two Raju-owned entities — Maytas Infra and Maytas Properties — for $1.6 billion. Angry shareholders have been clamouring for an overhaul of the board of directors and Raju’s exit from the post of chairman.

The call for change gained momentum after four of the nine Satyam directors resigned when they learnt that the Raju family had pledged their entire 55 million shares (equivalent to an 8.27 per cent stake) held by SRSR Holdings — an entity controlled by the Rajus — with lenders.

Enter Anil Ambani’s Reliance ADAG Group.

Sources say that under a quid pro quo deal that is now under negotiation, cash-rich ADAG Group can provide funds to help Maytas Infra achieve financial closure for the Rs 12,000-crore Hyderabad metro project before the March 31 deadline.
In return for the Maytas bailout, ADAG will be able to pick up a 13-14 per cent stake in Satyam, thereby emerging as the single largest shareholder of the software giant that counts 185 Fortune 500 companies among its clients.
Ambani won’t have to come out with an open offer if he doesn’t cross a 15 per cent threshold through this “friendly takeover”.

Sources say Reliance Mutual Fund and the insurance arms of the ADAG group have been scooping up Satyam shares over the past few weeks after the lenders started offloading the shares that the Rajus had pledged against loans.

Raju had failed to meet margin calls from the lenders after the Satyam stock tanked in the market meltdown since May. Lenders usually lend up to 75 per cent of the value of the shares pledged. The stock has plunged over 60 per cent since May and the lenders wanted the Rajus to compensate for the dimunition in the value of the stock.

Although the Raju family claims that it has a 5.13 per cent stake in Satyam after the sale of the pledged shares by lenders, the promoters’ position is a little more precarious.

On Friday, the promoters admitted in a filing that out of the 34.58 million shares (or 5.13 per cent) they nominally possessed, about 21.96 million shares were still pledged with the lenders. This means that the promoters actually have unfettered control over only 12.62 million shares (translating into a 1.26 per cent stake).

Sources in the Andhra government said ADAG Group had been showing keen interest in the Hyderabad metro project that had been bagged by Maytas Infra.

Maytas Infra ran into trouble of its own after its chief executive officer P.K. Madhav was arrested on criminal charges stemming from the Nagarjuna Finance payment scandal. Madhav was earlier with the Nagarjuna group.

Maytas has to pay Rs 11 crore to the Greater Hyderabad Municipal Corporation by March 31 in connection with the metro project but is unable to rustle up funds in a credit-scarce market.

Sources said both ADAG Group and L&T Infotech had been in separate talks with the Satyam promoters and the Andhra government to infuse funds into the special purpose vehicle floated by Maytas for the metro project.

Andhra chief minister Y. Rajashekhara Reddy has brushed aside suggestions that the turmoil at Satyam has jeopardised the Hyderabad metro and the Machilipatnam port projects that Maytas had bagged. “We have been informed by the promoters that there is no threat to these projects,” he told reporters on New Year’s day.

January 5, 2009 Posted by | news | , , , , , , , , , | Leave a comment