By Sumeet Chatterjee
HYDERABAD, India (Reuters) - Shares in India's Satyam Computer Services
Stand-in CEO Ram Mynampati has admitted the company -- whose market value has evaporated to $170 million from over $7 billion just six months ago -- faces a crisis of unimaginable proportion following chairman and founder Ramalinga Raju's admission of years of accounting fraud.
The remnants of Satyam's board -- Raju, his brother and four independent directors have quit or tendered their resignations -- meets on Saturday to consider survival options.
These may include a takeover or bringing in a strategic investor; how to keep the company liquid; the appointment of an investment banker; and what to do with latest quarterly results that have to be published this month.
The company's chief financial officer has also offered to resign.
"There's a big question mark over everything. We don't know what kind of business model they have now," said Amar Ambani, vice-president of research at broker India Infoline.
"Raju's declaration says that at the operating level the margin was 3 percent, so at the net level it must have been a loss, which makes it extremely unviable. They have been borrowing to pay salaries, which means they have no cash at all."
Satyam shares slumped to 11.50 rupees, their lowest since March 1998, and a far cry from their 2008 high of 544 rupees. By 0820 GMT (3:20 a.m. EST), the stock was down 47 percent at 21.10 rupees.
Satyam will be cut from India's benchmark stock index, the Bombay Stock Exchange's 30-share Sensex <.BSESN>, from Monday.
HOPES DASHED
Analysts said recent hopes that Satyam could survive by being taken over had been dashed given the scope of the scandal and the potential for big legal losses.
"The largest scandal in India's corporate history calls into question the viability of the company as an independent entity," consultancy Forrester said in a January 8 research note.
"As a result, sourcing and IT executives need to actively review their exposure to the company and their options as a cloud of uncertainty hangs over the company.
"Both clients and employees will desert Satyam as a result of competitive wooing. In our interactions with several of Satyam's employees across the organization they showed utter frustration," it noted.
Satyam specializes in business software and back-office services for clients including General Electric
Satyam said it was contacting main customers individually to assure them services would continue as normal, and said it had received expressions of support.
National Australia Bank Ltd
"Satyam is continuing to deliver on the contract ... and is meeting its contractual obligations. Contingency plans are in place to ensure continuity of service," a bank spokeswoman said.
L&T SITTING PAT
The chairman of Larsen & Toubro
"When we invested, our idea was to strike some sort of go-to-market strategy, some sort of strategic alliance, if it was possible," A.M. Naik told CNBC TV18, noting Satyam's share price was around 188 rupees before Raju's resignation bombshell, far higher than the price at which L&T had bought its stake.
Naik did not rule out a possible alliance with Satyam once there was clarity on its losses and liabilities, including any from law suits. L&T runs a mid-sized outsourcing unit called L&T Infotech.
But the local mutual fund venture of Canadian insurer Sun Life Financial
India's mutual fund industry collectively owned 3.92 percent of Satyam at end-November, data from fund tracker ICRA Online showed.
Several securities fraud class action lawsuits have already been filed in the United States on behalf of investors who bought Satyam American Depository Receipts (ADRs) in the last five years.
In a five-page resignation letter that stunned India's business world, Raju said about $1 billion, or 94 percent of the cash and bank balances on Satyam's books at end-September did not exist.
Saturday's board meeting will go ahead as planned, though the board is much smaller than the one that last month approved a botched attempt to buy two construction companies part-owned by Satyam's founders.
Raju has said that deal was a last throw of the dice to try to resolve the problem of the fictitious assets.
(Additional reporting by Janaki Krishnan in MUMBAI and Miranda Maxwell in MELBOURNE)
(Writing by John Mair; Editing by Ian Geoghegan)
