Satyam May Take 3 Months to Restate Accounts, Delaying Bailout

Jan. 15 (Bloomberg) -- Satyam Computer Services Ltd.'s new auditors may take three months to clear up an alleged $1 billion fraud at India's fourth-largest software exporter, delaying access to government funds.

Satyam fell 32 percent today after the government said it has no plans for a bailout until the board seeks aid. Satyam won't know how much it needs until auditors confirm assets and assess how much clients owe, director Deepak Parekh said. ``The government doesn't bail out every sick company,'' he said.

The delay may restrict funding Satyam needs to convince customers including Nestle SA and Telstra Corp. to remain and help protect the Hyderabad-based company's 53,000 jobs. Satyam has lost 89 percent of its market value since chairman Ramalinga Raju said Jan. 7 he'd fabricated $1 billion in cash and assets.

``It will need a lot of convincing by the new management to make Satyam's clients stay,'' said Viswanathan Vasudevan, who helps manage $300 million at Aquarius Investment Advisors Pte. in Singapore. ``Any added uncertainty or delay in a rescue plan for the company may only lead to exits by customers.''

The government appointed three more directors today and said it may expand the board as needed later. Tarun Das of the Confederation of Indian Industry, T.N. Manoharan, a chartered accountant, and Suryakant Balkrishna Mainak of the Life Insurance Corp. of India joined three directors appointed last weekend.

KPMG and Deloitte Touche Tohmatsu were hired yesterday to restate Satyam's accounts. PricewaterhouseCoopers LLP's Indian affiliate said yesterday that its audit reports could no longer be relied on.

The Institute of Chartered Accountants of India has started proceedings against Satyam's auditor, Prem Chand Gupta, minister for company affairs, told reporters in New Delhi today

Money Owed

The extent of aid needed will depend on the money Satyam is likely to receive as payment from customers for work it has rendered, Parekh told Bloomberg. Satyam has 17 billion rupees ($347 million) of pending payments from clients, he said. The audit will take eight to 12 weeks, Parekh said.

``The company has not asked for any package, they may not need that,'' minister Gupta said.

Satyam is seeking executives to replace managing director Rama Raju and chief financial officer Srinivas Vadlamani. The executives and founder Ramalinga Raju will seek bail tomorrow after having been remanded to custody until Jan. 23.

Former interim Chief Executive Officer Ram Mynampati had asked the government to provide 1.5 billion rupees in assistance to help the company meet payments on health insurance costs for employees based in the U.S., Economic Affairs Secretary Ashok Chawla told reporters in New Delhi today. Mynampati served for less than three days before the government sacked the board.

Shares Decline

Satyam's shares fell 9.55 rupees to 20.30 rupees at the 3:30 p.m. local time close, while the benchmark Sensitive Index lost 3.5 percent.

Nestle, the world's largest food company and a Satyam client, said this week it is considering alternative solutions to avoid disruption of information technology operations. Telstra, Australia's largest telephone company, said Satyam's disclosure will be a factor when it cuts two out of its four major information technology suppliers this year.

Satyam, founded in 1987, has offices from the U.S. to the U.K., Brazil and Australia. The company writes software and manages computer systems for companies such as General Electric Co. and ArcelorMittal, the world's largest steelmaker.