NEW DELHI // The demise of the Indian IT giant Satyam has not only jeopardised the prospects of thousands of its employees worldwide but has marred the image of India's burgeoning IT industry. India's fourth-largest software services exporter, with a presence in 57 countries, Satyam Computer Services is in troubled waters after its founder and chairman, Ramalinga Raju, a Harvard alumni, admitted to massively inflating figures on the balance sheets.
The fraud amounted to seven trillion rupees (Dh535 billion). The entire board was dissolved yesterday in anticipation of the naming of new directors. When announcing his resignation last week, Mr Raju apologised to Satyam and its stakeholders, but that could not stop the damage to the company's shares, which plummeted 78 per cent in a day. The revelation has caused panic among Satyam's 53,000 employees despite repeated assurances from Ram Myanampati, the interim CEO.
"It was a dream come true when I joined the company. It was the dream of every Indian IT professional to be a part of Satyam," said Sharma, a New Delhi-based Satyam employee who has been with the company for six years and is now looking for another job. Sharma, who asked only to use his surname, handles a team of 65 people and recently took out a loan to buy a new car and an expensive house. "The thought of losing this job is giving me sleepless nights. I have a family to support. Most of my salary is going into paying the bank loan and education of my two kids and there are not much savings left."
Such job portals as naukri.com, Yellojobs and Head Hunters India said they had received more than 18,000 CVs from Satyam employees. "It is most likely that Satyam will cut 15,000 jobs next month as the company is left with no cash to pay salaries," said Kris Lakshmikanth, the chief executive officer of Head Hunters India. Media reports quoted Satyam employees as saying that management is planning to hold back two months of salary starting this month, though company officials denied this. The company's US-based employees say they have yet to receive their December salaries and others said allowances and the reimbursement of expenses have not been paid.
Still, many employees say they are willing to wait for salaries if their jobs remain intact. "It's a lesser evil than getting laid off during such times," said Nikhil Banerjee, who works in one of Satyam's New Delhi offices. Another major concern, shared throughout India, is the damage done to Satyam's iconic image and that of the country's burgeoning IT industry. Satyam, which in Sanskrit means "truth", is based in the southern Indian city of Hyderabad - nicknamed "cyberabad" - and was a showpiece that helped the state of Andhra Pradesh attract major firms, including Microsoft, Oracle, Nokia, Motorola and Infosys, to set up shop.
After its establishment in 1987, the company recorded tremendous growth and over time developed relationships with such giants as Unilever, Nestlé, DuPont, Cisco Systems, GE, Sony, Citigroup, Oracle, Microsoft, the US government, IBM, Siemens and Applied Materials. The current fiasco threatens to put these relationships in jeopardy. It also jeopardises Satyam's landmark multimillion-dollar deal with Fédération Internationale de Football Association (Fifa) in 2007 when it became the first Asian company to get sponsorship rights for the 2010 and 2014 world cups, in South Africa and Brazil respectively. Joining such giants as Budweiser, Castrol, McDonalds, Continental and MTN as the six sponsors of the World Cup, this deal perhaps more than any other put Indian business on the global map. But now, the company labelled as "India's Enron" by analysts, is being closely monitored by Fifa.
"Fifa is monitoring the situation related to Satyam, a company which provides services of technical support to Fifa. At this stage and until we have more information, it is too early for Fifa to make any further comments on the matter," a Fifa spokesperson said in an e-mail reply to the Daily News and Analysis website. Last week, Fifa said Satyam's sponsorship of its events would not be affected by the current crisis and it had no reason to believe the IT major would be unable to live up to its promises.
But the biggest corporate fraud in Indian history is certain to affect the country's outsourcing and technology sectors, already hit by the global economic slowdown. More worrying still, it could threaten foreign investment in India as international firms might think twice about choosing India-based IT service providers for projects, analysts said. "The Satyam episode will dent the image of any fast-growing Indian company. Suspicion will grow toward Indian companies, who have tried a number of methods to meet market expectations and were seen as darlings of the market," said Saurabh Mukherjea, head of equities with Noble Group, a trading company based in Mumbai.
As Ramalinga Raju wrote in his resignation statement: "Every attempt to eliminate the gap failed. It was like riding a tiger, not knowing how to get off without being eaten." Satyam employees, foreign investors and Indian observers may now be wondering what the "tiger" has in store for Satyam and India's economy. email@example.com