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Jan 13, 2009, 04.03 PM IST | Source: CNBC-TV18

Ready to bail out Satyam, if required: Govt

Economic Affairs Secretary Ashok Chawla has said the government may provide temporary direct or indirect liquidity support. Commerce Minister Kamal Nath said the government was willing to look at financing options for Satyam.

Kamal Nath, Commerce Minister

Economic Affairs Secretary Ashok Chawla has said the government may provide temporary direct or indirect liquidity support to in-the-news Satyam Computer Services . Commerce Minister Kamal Nath said the government was willing to look at financing options for Satyam.

 

Meanwhile, in the first press conference by the new Satyam board that concluded on Monday evening, Deepak Parekh said the company would appoint a new audit firm within 48 hours. Parekh said after the new audit firm restates accounts, they would have a clear idea on what the liquidity position is, and whether there are any loans against the receivables. “We will need to see if the receivables are not overstated and that there are not more loans than what is stated. After that, we will decide on if and whether we need help from the government on the liquidity front.”

 

The new board also clarified that it has not sought any immunity from the government from any suits that could be filed against the troubled IT major. “As we have been appointed by the government, and are not liable for the action of the previous board, we are already protected,” Achuthan, part of the government-appointed three-member board, said.

 

Satyam has been in the news ever since its former chairman B Ramalinga Raju last week admitted to inflating the company’s balance sheet and was subsequently arrested. Earlier, Satyam tried to execute a deal to pick stake in real estate firm Maytas — also promoted by the Raju family. The move later turned out to be an attempt by Raju to get real assets on the Satyam’s books instead of non-existent ones. CNBC-TV18's Vivian Fernandes reports.

 

Here is a verbatim transcript of the exclusive interview with Ashok Chawla on CNBC-TV18. Also watch the accompanying video.

 

Q: How has life changed here without Resident Finance Minister?

 

A: We have the Prime Minister (PM) as the Finance Minister (FM), so most of the important policy issues go up to the FM. The more operational issues are dealt with at the level of Minister of State, so nothing much has changed.

 

Q: But a lot has changed in the economy and that brings me to the Satyam episode. I feel that the government intervention on Satyam is quite unique, because in the past we have had governments intervening, nationalizing industries, textile mills, jute mills, engineering companies to protect the employment and the Reserve Bank of India (RBI) for example merging failed banks to prevent a run on the banking system. What is the reason that the government moved in on Satyam, was it to contain the fallout on a wider IT industry?

 

A: At this stage investigations are going on as to what happened in what was otherwise and ongoing sound IT company. So the investigations are being done by both the Securities & Exchange Board of India (SEBI) under the Sebi act and by the Ministry of Corporate Affairs under the company’s law.

 

So, pending final decision on what has happened and what further action needs to be taken in view of the fact that this is a large company which was one of the star performers in the IT sector, employs a very large number of people, the government moved the company law board and got their permission to reconstitute the board which has been done. The idea now is that the board which is in position, the board of directors of the company, will carry forward the operations of the company.

 

Q: How long will the trusteeship of the government continue? How long before the government withdraws its nominees from the Satyam board, what milestones will have to be satisfied?

 

A: The board has just started functioning from January 12. So, it is very early and premature to say how it will unfold and what will be the future course of actions. We will have to wait and watch.

 

Q: Last week, the Interim CEO, Ram Mynampati, was saying that there is a liquidity issue. Is there any possibility of the government stepping in to provide temporary liquidity support to the company, so that it can meet its salary obligations as well as service clients?

 

A: There have been some discussions in the government on this. What is being suggested to the company and its board of directors is that they should get an idea of what are the immediate requirements and come back to their bankers and to the Finance Ministry to indicate the size of that. I don’t think the intention is that the government will get in directly into providing some funds from the government. But the government will facilitate and try to ensure what the company needs for its normal legitimate operations is able to be accessed by the company.

 

Q: Since the government is playing a match maker, any possibility of a private equity players being brought in to takeover the company?

 

A: At this stage it is all very difficult to conjecture and speculate.

 

Q: What about the change in top managers?

 

A: That is the call which the Board of Directors will take. They will appoint the Chief Executive Officer (CEO), they need to appoint the Chief Financial Officer (CFO), they need to see, if they want to continue the auditor or appoint new auditors. So, the government’s role as has been articulated by the Minister of Corporate Affairs and by the government is that from now onwards it’s for the Board of Directors to carry this forward.

 

Q: A number of lawsuits have been filed against the company. But the company itself is not culpable, it is actually the promoter so there has to be a nexus between crime and punishment, there is no point in punishing the investors at large for the crime of its promoter. No possibility of granting immunity to the company?

 

A: That is an issue, which will be examined by the Ministry of Corporate Affairs and the Law Ministry.

 

Q: Do you think that the Satyam fraud was a failure of the regulatory system and the corporate governance norms or do you think it was essentially a failure of people there, who had fiduciary responsibility, not discharging their obligations?

 

A: The investigation will give us a complete idea. But prima-facie it seems that it was essentially something which was on the part of the management or on the part of the people handling the affairs.

 

 

 

Here is a verbatim transcript of Vivian Fernandes' comments on CNBC-TV18. Also watch the accompanying video.

 

First of all, one must understand that the government’s intervention in Satyam is quite unique because in the past decades, the government has nationalised sick industries – textiles, jute, the metal-bashing industries in West Bengal to protect jobs. The RBI has rescued banks to prevent a run on banking system. However, Satyam does not pose a systemic risk yet the government has changed the board of directors because it feels a large number of jobs are involved and also to contain the fallout on India’s IT industry, which is why both the Commerce Minister and the Secretary of the Department of Economic Affairs and the Finance Ministry say that they are prepared to help Satyam meet its cash requirements.

 

Kamal Nath said, “The Government is going to look at all aspects of this. There are many jobs at stake and it is not only jobs at stake, it is an institution at stake. It is an institution with a brand name. Now just because one or two people having engaged in something which was wholly wrong – government will do all it can. Once they come up with a proposal, it is for the board to now come up with a proposal and a package for government which the government will consider.”

 

Ashok Chawla said, “What is being suggested to the company and its Board of Directors is that they should get an idea what are the requirements. The immediate requirements and come back to their bankers and the Finance Ministry to indicate the size of that. I don’t think the intention is that the government will get in directly into providing funds. The government will ensure that what the government needs for its normal legitimate operations is able to be accessed by the company.”

 

Chawla said it was premature to speculate how long the government’s handholding would continue and when it withdraw its nominees from the Satyam board. Chawla also said that the board members were quite concerned that the company would be punished for the sins of its promoters and have expressed their concerns.

 

Read: Everything about the Satyam scam here

Mahindra Satyam stock price

On July 03, -, Mahindra Satyam closed at Rs 115.30, up Rs 0.00, or 0.00 percent. The 52-week high of the share was Rs and the 52-week low was Rs .


The company's trailing 12-month (TTM) EPS was at Rs 7.66 per share as per the quarter ended March 2013. The stock's price-to-earnings (P/E) ratio was 15.05. The latest book value of the company is Rs 28.15 per share. At current value, the price-to-book value of the company is 4.10.

READ MORE ON  satyam, raju, Ashok Chawla, Kamal Nath, scam
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