India vows to end fraud as Satyam scandal rocks
New Delhi, January 8, 2009
India vowed to strengthen laws to prevent corporate fraud after Satyam Computer, the country's fourth-largest software company, shocked investors by revealing profits had been falsely inflated for years.
Chairman Ramalinga Raju resigned on Wednesday after revealing India's biggest corporate scandal in memory, sending the company's shares plunging nearly 80 percent.
Investigators are expected to swoop on the company's headquarters in Hyderabad in southern India to search for clues on how the fraud could have been hidden for so long.
"We are concerned about what has happened in Satyam, and the government will take all necessary action to ensure these types of scandals do not take place again. Whatever steps could be taken will be taken," Corporate Affairs Minister Prem Chand Gupta told Reuters.
The scandal has cast a cloud over foreign investment in Asia's third-largest economy and over its once-booming outsourcing sector, which posted stunning sales growth for years and lavished investors with handsome returns.
It may also increase investor nervousness about weak corporate governance and oversight in emerging markets, which are still reeling from the global financial crisis.
Satyam employees shuffled into its Hyderabad office as usual on Thursday, refusing to speak to more than a dozen reporters camped outside the gates.
The government has asked the registrar of companies in Hyderabad to file a report, while the stock market regulator has ordered a probe into buying, selling and dealing in the company's shares. Stocks in India did not trade on Thursday due to a public holiday.
Bombay's benchmark stock index tumbled more than 7 percent on Wednesday and the Indian rupee fell after the Satyam bombshell, which some analysts dubbed "India's Enron" after the collapsed US energy firm.
The New York Stock Exchange halted trading in Satyam's shares indefinitely, saying it wanted to review the news. - Reuters