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Satyam scam: Infosys, peers react

Published on Wed, Jan 07, 2009 at 12:59 | Source : CNBC-TV18

Updated at Sat, Jan 10, 2009 at 13:58

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Commenting on the magnitude of the Satyam scam, Mohandas Pai, Head-HR Administration, Infosys , said, he had never imagined something of this proportion would happen. "It is a bad day for corporate India and IT industry. He feels that the auditing process should get more rigorous and that all companies should make sure that bank balance confirmation goes directly to auditors.

Pai feels outsourcing clients will take a more cautious approach now and people having large exposure to outsourcing will consolidate and work to minimise the risk, he added.

"Investors will be very worried and this is critical time for company and thus management has to be changed for company to protect careers of their employees',." Pai said. Clients will ask for more information; as Satyam fraud is an aberration with deliberate malicious intent. As far as the FII flows are concerned, there will be an impact, but it will be more selective.

According to Pai, independent directors not knowing about the fraud is quite credible, as they know if they are engaged in the same, the criminal liabilities could come to them.

He feels it is good to have regulator and the government set up its team to investigate - come out with a set of things to be done and the auditing process should get more rigorous.

However, according to Pai, the more worrisome thing as of now is what happens to the 50,000 people, because they are innocent people working in the company and there will be a change in the management team. Probably new people will be appointed by the shareholders and the new management team will work to protect the carriers of all the 50,000 people. "A new team has to come in place and take charge immediately and the regulators have to step in to tell the new team to run the business, while they investigate this fraud."

S Gopalakrishnan, MD & CEO, Infosys, said, "It is very difficult to say how much of Satyam's core business will eventually be preserved after this episode, unless and until a full investigation is done to understand the implications, the depths of the problem. There will have to be a relook at the accounts and audits and only then somebody can say what should be done.

When it comes to employees, they are a valuable resource. When it comes to client relationships, they would probably consider looking at alternatives and if the switching cost is not much then some of them would probably do.

Commenting on the Satyam fraud, Suresh Senapathy, CFO, Wipro has assured that Satyam's case is isolated and not associated with any industry. He said Satyam will face both civil and criminal prosecution in the US.

According to Senapathy, overstatement of assets, calls for more valuation discounting. He feels shareholders are more vulnerable, and clients will assess risks now.

He said any kind of an acquisition that one could think of, it should fall into a strategy that a particular company lays out. And from that perspective any acquisition of this kind of an asset would mean an aggregation and typically Wipro has stayed away from such acquisition.

CP Gurnani of Tech Mahindra said Indian IT industry should call it a crisis situation. However, there need to be some more announcements for employees and shareholders of Satyam. Gurnani believes that none of the scandals get built overnight. "I do assume that the regulator, Chartered Accountants, the auditors should have seen it coming."

"Satyam has a small presence in the telecom and real estate, so we could be interested in part of business if customers want us to."

However, he said, "There were rumours yesterday and all I can say is that anybody who acquires this company is only basically acquiring lawsuits now. Remember this company also has a presence in the US."

Also read:

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Consulting stock exchanges to decide course of action: Sebi

See Satyam stock at Rs 10: Shankar Sharma

Outraged auditors see action from regulators ahead

Min of Corp Affairs seeks registrar's report on Satyam

LIC still confident about Satyam's potential as a Co

FICCI, Nasscom call for revamp of corp governance norms

B Ramalinga Raju's letter to Board

Satyam: A cleverly crafted scam, says Udayan