Inside story of Satyam: the frenzied Sunday that changed it all

Editor’s Note: The story begins on 7 January 2009, with Satyam’s founder and chairman admitting to cooking the books of his own company to the tune of $1 billion. The news stuns the corporate sector. After all, at that time, Satyam counted 185 of the Fortune 500 companies as its clients. In April 2009, after a bidding and evaluation process, Venurbay Consultants Private Limited, a 100 percent subsidiary of Tech Mahindra, becomes the new owner of Satyam. In June that year, Satyam is rebranded as Mahindra Satyam. The rest is history. In this excerpt from the forthcoming new book‘The Resurgence of Satyam - The Global IT giant, (Random House India, Random House Publishers India Private Limited) Zafar Anjum recreates the eventful Sunday after the Rajus and their CFO were arrested, a day of breakneck activity which saw the government reach out to Kiran Karnik, Deepak Parekh and C Achutan and convince them to join the proposed new board.

January 11-15, 2009

Hyderabad and New Delhi

It was 11 am on Sunday, January 11. Former NASSCOM president Kiran Karnik was at home in Delhi. He was looking forward to a quiet weekend after days of being on the road.

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His phone buzzed. The caller was Anurag Goel, Secretary of Ministry of Corporate Affairs, Government of India. Without beating about the bush, Anurag requested him to be part of Satyam’s new board.

Karnik had been following the Satyam story ever since it broke on January 7. Being an industry veteran, he knew the implications of Satyam going down. It was a crisis for both India and India Inc. But he also saw it as an opportunity. What if India could fix Satyam? It would make India the only country in the world to have done that. The shame of India could be turned into the pride of India. It was a difficult proposition but not an impossible one.

[caption id=“attachment_484072” align=“alignleft” width=“380”]  Reuters[/caption]

Karnik could feel a palpable sense of urgency in Goel’s voice. Being a representative of the government, Goel seemed determined to save the situation at Satyam. Karnik gave in and said yes, accepting the ‘responsibility’ in principle.

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As soon as he acquiesced to Goel’s request, the bureaucrat asked him if he could fly to Hyderabad the same day.

‘What? Today itself?’ Things were going too fast, Karnik thought.

Karnik said he would check the flight availability and get back to him. In the next few hours, the ministry not only booked a flight for him but also arranged his accommodation in Hyderabad. ‘Karnik was impressed. The government worked on Sundays.’

Just like Karnik was brought on board, the ministry of corporate affairs roped in Deepak Parekh and C. Achuthan in the same manner to be part of the new board.

Was it easy to get all of them on board? Not really. The biggest of these miracle workers’ concern was ’the possibility of them becoming a party to the litigation, especially the class action suits in the US. They were, however, convinced that the government would move a petition with the CLB to indemnify them from any legal angle.’

Back in Hyderabad, even though January 11 was a Sunday - a day of rest and recreation for most people - there was immense restlessness and anxiety among the Satyam employees. The last two days, January 9 and 10 had seen the high drama of arrests of the two Raju brothers and CFO Vadlamani. But the future of Satyam as a company was still uncertain. Arresting the Rajus was all fine and good but what was uppermost on the minds of people both inside and outside Satyam was whether the Government of India would bail the company out, and, if yes, then in what form?

The government had dissolved the old Satyam board that very Friday. All eyes were now on Prem Chand Gupta, the Minister of Corporate Affairs, to replenish the board with fresh faces.

The anxiety was laid to rest on Sunday when the Indian government announced a new board for Satyam. Once the three distinguished personalities had given a nod to be on the board, Gupta held a press conference in New Delhi. ‘Having considered all aspects of the current situation, the government has decided to constitute a board of eminent persons having expertise in different fields like finance, information technology, law and administration. Such a board will provide the necessary vision along with a responsible and accountable leadership to the company in this hour of crisis,’ said Gupta.

He then announced that the government had selected three ’eminent persons’ to serve on Satyam’s board: Deepak Parekh, Chairman, HDFC Bank, Kiran Karnik, a former head of NASSCOM and C. Achutan, a lawyer and former presiding officer of the Securities and Appellate Tribunal (SAT).

[caption id=“attachment_484079” align=“alignright” width=“380”]  Cover of the book. Image courtesy Random House India.[/caption]

In his press conference, Gupta said that the board would met within the next twenty-four hours and decide who would serve as Satyam’s new chairman, He also said that the new board could select other directors as required.

Gupta said that the government would consider requests from Satyam’s large shareholders for seats on the board, but that it was up to the new board to decide who would be invited to join. ‘All options are open,’ Gupta said. It is important to ensure the continuity of the company in the interest of its shareholders, employees, customers and other stakeholders - both in India and abroad,’ he added.

Satyam welcomed the ministry of corporate affairs’ appointments. ‘Satyam welcomes this key development, which will ensure the company’s continued operations, help maintain customer confidence and associated morale, and restore investor trust. The new members are eminent and accomplished leaders, recognized in India and around the world for their expertise in finance, law, administration and the IT services industry. Satyam’s leadership team has complete confidence in them, and pledges to work closely in full cooperation with the new board,’ the company said.

‘This is a vital stabilizing development for Satyam, and it marks the beginning of a new chapter in the company’s history. It is the best news we’ve received in the past four weeks,’ a company spokesperson said.