NAB future with Satyam ‘under review’

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NAB future with Satyam ‘under review’

The National Australia Bank has confirmed the future of its services contract with Satyam is ‘under review’ following revelations of a US$1 billion accounting fraud at the Indian outsourcing giant.

A spokesperson for the bank told iTnews that NAB ‘is closely reviewing the Satyam matter’.

“Satyam is continuing to deliver on the contract,” the spokesperson said.

“Contingency plans are in place to ensure continuity of service, and in terms of the future of the contract, that is under review.”

The news follows follows yesterday’s announcement by Qantas that it currently views the business risks posed any Satyam fallout as ‘manageable’ but is monitoring the situation ‘on a daily basis’ until it is resolved.

At a press conference in India last night, Satyam’s interim chief Ram Mynampati put on a brave face , claiming the company had been ‘heartened by expressions of confidence and support from various clients’.

But the statement has done little to halt growing speculation that Satyam is heading for acquisition or structural separation in the wake of the scandal.

David Mitchell, senior vice president of IT Research at analyst firm Ovum, said the impact of the scandal ‘threatens [Satyam’s] continued existence’.

“In the short and medium term the hugely deflated valuation of Satyam is likely to make it vulnerable to takeover,” said Mitchell.

“Those who bought into Satyam stock during trading yesterday are likely to be hoping for a takeover bid that will drive up the price again.

“It is also possible that Satyam might find itself broken into pieces and the pieces sold off separately,” said Mitchell.

Doug Brown, partner of the Brown-Wilson Group and co-author of the “The Black Book of Outsourcing”, believes offshore outsourcing users will be the ultimate winners in the Satyam scandal because it will usher in a new era of scrutiny, transparency and corporate governance in the sector.

“Even if Satyam's problems are Satyam's only, the rest of the offshore industry is about to experience greatly elevated scrutiny,” said Brown.

Mitchell added: “In this case, we will see the Indian government re-examining its corporate government framework, with changes being made to strengthen it or at least to ensure the existing frameworks are robustly implemented – after all, Satyam was already subject to substantial scrutiny through external auditors, strong independent directors on the board and other supervisory controls.

“Many will wonder whether their own controls are strong enough and whether they are sure that their companies are not hiding similar problems, although at a lesser scale.”
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