Satyam Names Gurnani Chief to Help Rebuild Company After Fraud

June 24 (Bloomberg) -- Satyam Computer Services Ltd. named Chander Prakash Gurnani chief executive officer as new owner Tech Mahindra Ltd. starts to reorganize the company at the center of India’s biggest corporate fraud probe.

Gurnani, who headed the international operations at Satyam’s parent, replaced A.S. Murty yesterday. Subramaniam Durgashankar, formerly senior vice president of mergers and acquisitions at Tech Mahindra’s largest shareholder, was appointed chief financial officer. Gurnani said he plans to announce a reorganization of Satyam by tomorrow.

Gurnani, 50, aims to revive Satyam after a stock collapse prompted by former chairman Ramalinga Raju’s admission in January that he overstated assets by $1 billion. The new chief executive pledged he will improve the company’s corporate governance and customer ties as he tries to regain market share lost to rivals such as Infosys Technologies Ltd.

“Substantial changes needed to be made in the company’s organizational structure,” Kevin Trindade, a Mumbai-based analyst at KR Choksey Shares & Securities Pvt., said by telephone. Gurnani’s experience will make him “one of the most valuable assets” to Satyam, he said.

Satyam’s American depositary receipts gained 4.3 percent to $3.40 at 9:41 a.m. in New York trading. The stock has declined 59 percent in Mumbai trading since Raju’s disclosure on Jan. 7, while the benchmark Sensitive Index has advanced 39 percent.

Outbidding Wilbur Ross

Tech Mahindra Chairman Anand Mahindra, who outbid billionaire Wilbur Ross and Larsen & Toubro Ltd. with a $579 million offer in April, has said he’s taking a “calculated risk” in buying Satyam before the company restates accounts and without clarity on liabilities from lawsuits in the U.S.

The 54-year-old Harvard University graduate is also trying to keep Satyam’s clients from joining State Farm Automobile Insurance Co. in canceling orders.

“Attrition has been practically zero since April,” Gurnani, a chemical engineer from the Rourkela, India-based National Institute of Technology, said.

Tech Mahindra may be merged with Satyam in the next one or two years, he said. On June 21, Satyam, once India’s fourth- largest software-services provider, said it rebranded itself to Mahindra Satyam.

Gurnani, a former chief operating officer and founder of the Indian unit of Perot Systems Corp. said adding the Mahindra name to Satyam would help restore customer confidence.

Satyam lost contracts from about 46 customers to rivals such as International Business Machines Corp. and Tata Consultancy Services Ltd., the Economic Times reported in March. Applied Materials Inc., Nissan Motor Co., Sony Corp. and Telstra Corp. are among companies that have moved or are in the process of seeking out other vendors, the newspaper said at the time.

‘65-Year-Old Brand’

“Mahindra has lent their 65-year-old brand to the company and that has given Satyam a huge advantage,” Gurnani said. “The fraud that happened at Satyam was localized and by a few people. The Mahindra name has washed that away.”

Satyam, which maintains computer systems and provides back- office support for Cisco Systems Inc., Nestle SA and other clients, was put on sale by a state-appointed board to prevent an exodus of clients and employees after Raju’s disclosure.

“Tech Mahindra’s buyout of Satyam has had a positive impact on customer sentiment,” JPMorgan Chase & Co.’s Mumbai- based analyst Manoj Singla wrote in a note to clients earlier this month. Satyam will probably see a “sharp turnaround” in revenues and profits as early as this year, he wrote, assigning an “outperform” rating on the stock in new coverage.

Satyam on June 9 said unaudited profit for the quarter ended Dec. 31 was 1.6 billion rupees ($33 million), its first public disclosure of earnings estimates since Raju’s statement.

Tech Mahindra rose 0.8 percent to close at 747.35 rupees yesterday. The stock has surged 133 percent since it won a bid on April 13 to acquire control of Satyam.

Excess Employees

Still, Satyam, which said it had about 48,000 employees at the time Tech Mahindra agreed to buy it, has 8,500 employees on a “virtual bench” because of a lack of orders, Gurnani said.

Employee numbers had been padded to siphon off cash, public prosecutor K. Ajay Kumar said at a court hearing for Raju in Hyderabad in January. Satyam had 40,000 employees, short of the 53,000 claimed by the company, he said. Raju’s lawyer S. Bharat Kumar and Satyam denied the charge at the time.

“The business is determined not by the CEO; there are business segment heads,” who acquire clients, Tarun Sisodia, a Mumbai-based analyst at Anand Rathi Financial Services Ltd., said by phone before the announcement. “Now the question is, when will they announce their plan for integration.”

The Pune-based Tech Mahindra, partly owned by BT Group Plc, is the smaller of the two companies and had 25,429 employees at the end of December.

Set up as a venture between BT Group and India’s largest utility-vehicle maker, Mahindra & Mahindra Ltd., in 1986, Tech Mahindra counts the British telecommunications company as its largest client and mainly serves phone companies in Europe.

“Right now we have to roll up our sleeves and get this car back on track,” said Mahindra.