Go Ad-Free on CAclubindia with Daily Mobile Updates. Subscribe Now!

Fund gap weighs on board

shailesh agarwal (professional accountant) (7642 Points)

18 January 2009

Reply
Follow
Share

3 Replies

shailesh agarwal (professional accountant) (7642 Points)
Replied 18 January 2009

Fund gap weighs on board

OUR SPECIAL CORRESPONDENT

Mumbai, Jan. 16: The six- member government-appointed board of Satyam Computer Services has a number of pressing issues to deal with when it meets in Hyderabad tomorrow.

The immediate concern of the board will be to examine the avenues of raising funds to meet pressing liabilities such as salaries, especially as hopes of a government bailout have been dashed.

Board member Deepak Parekh has already said the company has Rs 1,700 crore of receivables, and it will try to urge customers to advance payments from the usual 30 to 60 day credit period.

It remains to be seen whether the board recommends the mortgaging of assets to raise cash.

Besides arranging funds on a priority basis, the board is likely to discuss the appointment of the chief executive officer and the chief financial officer.

In order to set Satyam’s house in order and prevent customers from switching to other IT companies, it is imperative to have a management leadership team that can steer the troubled software giant and keep the employees motivated.

The strengthened board may also consider the selection of its chairman to spearhead the rehabilitation of the company.

Board members Deepak Parekh and Kiran Karnik refused to comment on the agenda of the board meeting. “You will know the proceedings only after the meeting is over,” said Karnik.

In Delhi, Tarun Das, chief mentor of the Confederation of Indian Industry and member of international advisory board of Coca Cola Inc, said, “Our collective endeavour is to help find solutions to extremely difficult challenges facing the company. The priority is to safeguard the interest of employees, customers and investors.”

The restatement of accounts, which is a priority issue, will come up for discussion for two key reasons. First, banks may be reluctant to bail out Satyam before they are presented with a fresh and accurate picture of the company’s financials.

Second, the selection of auditors to restate accounts has run into rough weather with the regulatory body, the Institute of Chartered Accountants of India, questioning the board’s decision to select KPMG as one of the two audit firms to carry out the process.

The ICAI’s contention is that since KPMG is not registered with the institute, it should not be appointed to audit accounts.

The ICAI has also raised questions on the board’s decision to select two of the Big 4 audit firms to carry out the restatement instead of choosing an audit firm that is not related to global firms.

If the board does decide to ignore the ICAI’s perspective, it will have to farm out the work pertaining to the restatement of accounts to Deloitte Haskins & Sells and KPMG.

SATYAM: MULTIPLE WOES

Probable agenda:

• Check funding options

• Mull over appointing CEO and CFO

• Choose a chairman for board

• Modalities on restating accounts