Satyam records post-fraud profits

By Nick Taylor

- Last updated on GMT

Related tags Outsourcing

Satyam, the Indian IT outsourcing company whose former chairman admitted to a $1bn (€700m) fraud in January, has posted a $10.9m unaudited profit for February, sending shares soaring.

Following revelations by former chairman Ramalinga Raju that he had been involved in overstating the company’s profits, which led to the books showing $1bn the company did not have, Satyam’s share price tumbled by 90 per cent.

However, figures released this week suggest that Satyam has coped better than expected, with the surprise profit accompanied by news that the company had received orders from 215 mostly existing customers since the scandal broke.

Satyam said the contracts are worth $380m but no breakdown for the pharmaceutical sector has been published. Following the fraud revelations media reports claimed Novartis and GlaxoSmithKline were considering using other companies or in-house capacity instead of Satyam.

Following the positive news Satyam’s American depositary’s share price experienced a two day gain of 82 per cent and in Mumbai, India it reached the 10 per cent daily limit.

In addition to the results investors were pleased with JPMorgan Chase & Co prediction that there would be an upturn in earnings later this year.

Tech Mahindra has acquired a 31 per cent stake in Satyam and may purchase the 20 per cent needed to take a controlling stake in the business.

Not all good

Despite these positive reports there may still be problems at Satyam, with media reports claiming that the company may lay off up to 8,000 staff and faces claims worth $2.1bn.

Bloomberg ​reported that because of a shortage of work the company is considering cutting up to 8,000 jobs. In addition India’s Business Standard ​said that the company is facing claims relating to overseas acquisitions and other issues.

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