HYDERABAD, India The Indian government installed a new board at Satyam Computer Services Ltd on Sunday as authorities stepped up efforts to limit the damage from a fraud that has become India's biggest corporate scandal.
The three-member board will meet at Satyam headquarters in the southern city of Hyderabad at about 0400 GMT on Monday to lay out a roadmap for restoring confidence of clients and staff following revelations of a massive accounting fraud.
"There are a number of priorities we have to work on," said Housing Development Finance Corp Chairman Deepak Parekh, who was earlier named one of three members on the board.
"Restoring confidence is the main job, the first job we have, apart from restating the accounts."
The other members are Kiran Karnik, former president of the National Association of Software and Service Companies, a technology lobbying group, and C. Achutan, a former official of the regulator Securities and Exchange Board of India (SEBI).
The chairman of the board will be selected by its three members, Corporate Affairs Minister Prem Chand Gupta said.
"These three members will chart the future course of action for the time being," Gupta told a news conference in New Delhi.
New York-listed Satyam welcomed the reconstitution of the board, saying it would ensure the outsourcer's continued operations, help maintain customer confidence and staff morale, and restore investor trust.
"This is a vital stabilising development for Satyam, and it marks the beginning of a new chapter in the company's history," a company spokeswoman said. "It is the best news we've received in the past four weeks."
The accounting fraud at Satyam was revealed by its chairman and founder Ramalinga Raju last Wednesday. Its stock has since been battered and its valuation plunged to $330 million at Friday's market close, down from more than $7 billion six months ago.
The scandal has cast a cloud over foreign investment in Asia's third-largest economy and over its once-booming outsourcing sector, which posted stunning sales growth for years and lavished investors with handsome returns.
BACK ON THE RAILS
Stand-in Chief Executive Ram Mynampati said on Thursday the scandal had pushed Satyam, which specialises in business software and back-office services, into a crisis of unimaginable proportions and that liquidity was not very encouraging.
"The aim of the board will be to ensure continuity of business and confidence of clients as clients always gets concerned with such incidents," Karnik told television channel NDTV Profit. "Satyam will be back on the rails."
Analysts said the quick move to name new board members was a step in the right direction.
"I think it's a first good move towards restoring client confidence," said Sudin Apte, country head of market research firm Forrester. "But we still have a long way to go."
Meanwhile, police stepped up their investigation, having charged founder chairman Raju and his brother Rama Raju with criminal conspiracy and forgery on Friday after Ramalinga Raju said profits had been falsified for years and quit.
In a five-page letter sent to stock exchange authorities last week, Raju admitted about $1 billion, or 94 percent of the cash and bank balances on Satyam's books at end-September, did not exist.
The brothers are being held in jail, along with Satyam Chief Financial Officer Vadlamani Srinivas, after they were taken into judicial custody until January 23.
Police raided the residences of the arrested executives in Hyderabad on Sunday as part of the investigation, V.S.K. Kaumudi, Inspector General of Police, told Reuters.
Minister Gupta said the government would soon make a decision on appointing additional board members.
Several securities fraud class-action lawsuits have been filed in the United States on behalf of investors who bought Satyam American Depository Receipts (ADRs) in the last five years.