Satyam fraud may cost it GSK & Novartis deals

By Nick Taylor

- Last updated on GMT

Related tags Glaxosmithkline

Indian IT company Satyam continues to be rocked by the fraud scandal, with media reports claiming that GSK and Novartis are on the verge of taking their business elsewhere.

A report in The Economic Times of India​ said that Novartis and GlaxoSmithKline (GSK) are both considering using other companies or their own capacity for their IT needs.

GSK’s contract is due to be renewed this month but insiders have predicted it will take its business elsewhere, which would see Satyam lose out on a contract worth $30-40m

Currently Satyam provides GSK with support functions and assistance with litigation filed against the pharma and is among the IT giant’s top 25 clients. The loss of the GSK contract would be a sizeable blow to Satyam, which is trying to get back on track after a devastating few weeks.

Satyam’s new board has been attempting to stabilise the company to a backdrop of media reports that executives have fled the country to avoid investigators, which has been flatly denied by the company.

There has been some success, with the company claiming it signed 15 contracts in January including a new deal with a US pharmaceutical company. Further details have not been made available.

In addition Satyam was able to pay salaries for January and has secured funding from banks to cover immediate operating expenses. However, these are interim measures and it appears likely the company will be sold, with Spice Group currently a frontrunner.

The board has admitted it has received several offers, either to buy Satyam outright or acquire portions of the business. Satyam’s accounts are currently being gone over by Deloitte and KPMG who have been appointed as the company’s new auditors.

PricewaterhouseCoopers (PwC), which audited the books over the period the fraud took place, has seen two of its employees who signed Satyam’s balance sheets arrested in connection with the scandal.

Both have been suspended by PwC, which has also accepted the resignation of Thomas Mathew from his role as executive director of assurance for India. PwC has said Matthew was not connected with the fraud and would remain an auditor at the company.

Dr Reddy’s insists land purchase was legal

In the wake of the scandal Dr Reddy’s was accused of buying land that was acquired illegally by Ramalinga Raju, the formed CEO of Satyam who admitted to fraud last month.

Revenue authorities issued a notice to Dr Reddy’s claiming that land it acquired as part of the takeover of Satyam Institute in 2003 was classed as assigned, which prohibits it from being transferred.

Dr Reddy’s has stated the 134 acres was acquired legally in 2000 by Satyam from the title holders who had been in possession of it since 1942.

The revenue authorities are also investigating whether Satyam Technology Centre, the global headquarters of Satyam in Bahadurpally, is built on assigned land.

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