India's Satyam head arrested and board scrapped

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 (15.50 pence), 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 shrivelled to $330 million (217 million pounds), from more than $7 billion six months ago.

NONEXISTENT CASH

The chief financial officer offered to resign after Raju's admission that profit had been overstated for years and that about $1 billion, or 94 percent of the cash and bank balances on Satyam's books at end-September, did not exist.

"There's a big question mark over everything. We don't know what kind of business model they have now," said Amar Ambani, vice president of research at broker India Infoline.

"Raju's declaration says that at the operating level the margin was 3 percent, so at the net level it must have been a loss, which makes it extremely unviable. They have been borrowing to pay salaries, which means they have no cash at all," Ambani said.

The stock has fallen 87 percent in two trading days, pulling the broader market down. Shares in Satyam's main rivals, Infosys, Tata Consultancy Services and Wipro rose on expectations they would benefit from Satyam's circumstances.