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January 7, 2009

European investors unfazed by “India’s Enron” in IT

According to Reuters: “European investors remain upbeat about India despite an accounting scandal at IT company Satyam Computer Services (SATY.BO) that sent Indian markets tumbling on Wednesday.

Shares in the IT group fell almost 80 percent after founder and chairman Ramalinga Raju admitted inflating the company’s reported cash and bank balances by over 50 billion rupees ($1 billion).

While shaken by what has been dubbed “India’s Enron”, some investors say they will wait for signs of widespread malfeasance among Indian companies before deciding whether to change their investment policy on India.”

  • Satyam is the fourth largest of the Indian IT outsourcing firms
  • Satyam serves more than a third of the Fortune 500 companies
  • Satyam’s clients include multinationals such as NestlĂ©, General Motors (GM), and General Electric (GE)
  • Satyam’s auditor is PricewaterhouseCoopers, who endorsed the company’s accounts

Update: Ramalingam Raju, the chairman of troubled Indian IT outsourcing company Satyam Computer Services, resigned on Jan. 7, 2009, admitting the firm had falsified accounts and assets and inflated its profits over several years.

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