Satyam fiasco: Indian cos' image unlikely to take a hit

MUMBAI: Satyam Computers��� aborted Maytas acquisition plan has raised a question: Has the perception of overseas investors changed toward the corporate governance practices of Indian companies? Infosys Technologies, the first Indian company to list its ADRs on the Nasdaq, does not think so.

A top Infosys official said the Satyam episode is unlikely to affect the image of Indian companies. ���Hopefully, there will be a positive spin because the decision has been reversed. It shows that corporate governance is important, and the stock price will be immediately affected if there is no transparency,��� he said.

However, many overseas analysts have expressed their unhappiness over the development. James Friedman, an analyst with the Susquehanna Financial Group, wrote: ���In one of the weirdest soap operas in memory, in the span of eight hours, Satyam CEO Raju Ramalinga first decided to acquire, and then decided not to acquire, his sons��� affiliated infrastructure property management company with public shareholder money for $1.6 billion.���

In his report, Mr Friedman said that while they were excited to get such an established IT services investment at a synthetic discount and encouraged by the management flexibility, they remained stunned that investors were put in this position.



Broking firm CLSA was equally, if not more, scathing. ���Despite Satyam���s reversal of its decision to buy out common promoter-owned realty and construction businesses, questions will linger on, perhaps for a long time... Business fundamentals were already deteriorating, and we are reducing earnings 14-17% for FY10-11, but these are now peripheral to the central issue,��� analysts CFA Bhavtosh Vajpayee and Nimish Joshi said.

���The harm done to Satyam���s credibility, so arduously repaired in the past few years of business improvements, is likely to be long lasting. Our target price of Rs 160 implies 1.0xFY10 book, or 5xFY10 earnings. Valuation damage will last. Sell,��� they said.