One of India’s largest outsourcing companies yesterday struggled to retain an air of normalcy as the business community reeled from the news that the company chairman had been doctoring the books for years.
The whereabouts of chairman B. Ramalinga Raju, who quit on Wednesday after admitting that the company’s balance sheets were riddled with “fictitious” assets and “nonexistent” cash, were unclear, company spokeswoman Archana Uttapa said.
Trading on India’s stock exchanges was closed yesterday because of a holiday, but on Wednesday, news of the fraud by Satyam Computer Services Ltd dragged down the benchmark SENSEX stock index 7.3 percent — with Satyam’s shares plummeting nearly 78 percent.
Media reports have said that officials with the Securities and Exchange Board of India, which is investigating the incident, were traveling to the firm’s headquarters in Hyderabad, in southern India. But Uttapa said she was unaware that any such visit was planned.
Uttapa also sought to downplay Indian media reports saying many Satyam employees were worried about their jobs and getting their resumes ready.
“There is no concerted move by employees to quit and find new jobs as of now,” she said.
“All Satyam offices are open and working as normal,” she said.
The scandal, though, could ripple far beyond the Satyam offices.
“Much more than the fate of one company and its investors is at stake here, the scandal could taint the entire edifice of outsourcing,” the Hindustan Times, one of India’s most widely read newspapers, said in an editorial.
“This is a home-grown disaster,” the Indian Express said.
Satyam employs 53,000 people — among the 2 million Indians working in the country’s booming high-tech industry, which last year brought in an estimated US$40 billion.
While the accounting scandal raises questions about the quality of corporate governance in India, there were also plenty of comparisons to the collapse of the US energy giant Enron Corp.
“India’s strength in recent years has been its ability to produce great companies, and allowing that reputation to fall by the wayside is not in anyone’s interest,” the Indian Express continued, adding that Enron’s failure came in an economy more regulated than India’s.
US energy giant Enron collapsed in 2001 after revelations that bosses hid company losses and hyped the stock’s value while selling their own shares on the sly, leading to prosecutions.
Auditors Arthur Andersen were also convicted after allegations that employees shredded documents to hide evidence relating to the scandal.
Satyam’s balance sheet contained a US$1 billion hole that could no longer be concealed after a deal intended to save the struggling company was abandoned, Raju said in a letter to the board on Wednesday.
Raju said that none of the other board members was aware of the firm’s actual financial situation and that no one had profited from the inflated results.