Satyam shares tumble over fresh charges

Shares in Mahindra Satyam, the fraud-hit IT services group, fell nearly 11 per cent on Wednesday after India’s main criminal investigation agency filed new charges against the company’s former chairman and nine other people.

In a 200-page charge sheet, the Central Bureau of Investigation said that the alleged accounting fraud at the former Satyam Computer Services’ was significantly larger than previously stated by B. Ramalinga Raju, the former chairman and founder of the company.

Laxmi Narayana, CBI deputy inspector general, said “new evidence shows clearly that the fraud is bigger than we previously knew . . . If you add everything up the total [fraud] is now Rs118.8bn ($2.56bn) [from Rs71.36bn].”

Mr Ramalinga Raju was detained on charges of cheating and forgery in January after confessing to the board that he had manipulated the company’s accounts over several years, including creating a fictional cash pile of more than $1bn.

Satyam was acquired by Tech Mahindra in April and renamed after the Indian authorities had seized control of the company.

Investors on Wednesday pushed the company’s shares down 10.92 per cent to Rs90.55. Before the scandal,Satyam was India’s fourth largest IT services exporter and its stock traded at about Rs225 a share.

The CBI said Mr Ramalinga Raju and the nine others accused of fraud – whose names have not been released – allegedly raised Rs12.2bn in loans by forging board resolutions, and that they made Rs2.3bn in dividends generated by inflating the company’s profits.

An additional Rs4.3bn was allegedly generated by creating fake customers and invoices, while Rs1.8bn came from falsifying accounts to acquire Nipuna, a business processing IT company.

The CBI also claimed in a statement that 1,065 properties, including 6,000 acres of land, worth a total Rs3.5bn, had been acquired with money illegally taken out of the company.

Bharat Kumar, the lawyer representing Mr Ramalinga Raju, told Bloomberg that he was unaware of the new charges.

Mahindra Satyam declined to comment. However, a person close to the company said that in spite of the sharp drop in the stock price the group was in good business shape.

At a conference in Mumbai, Atul Kunwar, Mahindra Satyam’s new president, said customer attrition had stopped and since July it had added 36 clients, making a total of 420. These include General Electric and Cisco Systems.

However, analysts in India were dismayed at the renewal of controversy surrounding Mahindra Satyam.

“The bad news never seems to end for this company,” said Sudin Apte, an IT analyst at Forrester Research.