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Satyam Seeks SEC Approval To Shorten Period of Earnings Restatement

posted Mar 11, 2011 19:24:09 by mahindrasatyam
MUMBAI (Dow Jones)--Indian software exporter Satyam Computer Services Ltd. (500376.BY), which is recovering from a fraud scandal, is in talks with the U.S. Securities and Exchange Commission to shorten the time frame for which the company would need to restate its earnings under U.S. accounting standards, its chairman said.

A restatement of earnings under U.S. accounting standards would be one of the prerequisites for Satyam to be able to relist on the New York Stock Exchange. A relisting will also be an important step in the fraud-hit company's efforts to recovery and its ability to attract clients who require vendors to prove financial viability, usually through their compliance with U.S. accounting standards.

"We are talking to U.S. authorities to allow the restatement of the last two or three years," Chairman Vineet Nayyar told Dow Jones Newswires in a recent interview.

The SEC had asked the company to restate its past earnings dating back to the last seven years, said the executive. An SEC official declined to comment.

Satyam's shares reached a day's high of INR66.45 after the news. The stock closed up 0.4% at INR65.15 on the Bombay Stock Exchange and the Bombay market ended 0.2% higher.

The Hyderabad-based company had delisted its American depositary receipts from the New York Stock Exchange on Oct. 14 as it expected to miss an Oct. 15 deadline to file financial statements with regulators under U.S. accounting standards.

Though Satyam has yet to report its earnings under U.S. accounting standards, it has reported them under Indian accounting standards. The company has reported results for the fiscal years ended March 31, 2009 and March 31, 2010 as well as quarterly reports for the periods ended June 30, Sept. 30 and Dec. 31, 2010.

"As soon as our accounts are restated in terms of U.S. GAAP, we will ask to be relisted again," Nayyar said.

The company plunged into turmoil after its founder and then chairman, B. Ramalinga Raju, confessed in January 2009 to falsifying the company's profits for years and holding a fictitious cash balance of more than $1 billion. Criminal proceedings initiated by India's federal investigative agency are under way against founders Raju and his brothers, as well as other Satyam senior executives who have stepped down from their duties at the company.

In April 2009, Indian software company Tech Mahindra Ltd. (532755.BY) gained majority control of Satyam in a government-led auction and subsequently renamed it Mahindra Satyam though the company continues to trade under its former name. Nayyar is also the chief executive of Tech Mahindra.

The company, once ranked the fourth largest in the Indian outsourcing business, has yet to fully recover from the scandal. For the three months ended Dec. 31, it reported a net profit of INR589 million on revenue of INR12.79 billion.

Nayyar said Satyam's margins on earnings before interest, tax, depreciation and amortization is likely to improve from 6.4% in the three months ended Dec. 31. The improvement is likely to come from efficiency and a likely 3%-4% increase in pricing, he said.

Nayyar also said Satyam's revenue is likely to grow in line with industry estimates in the next 12 months.

Revenue growth from India's software exports will likely speed up to 18.7% in the fiscal year through March, and then slow slightly to 16%-18% in the next 12 months, India's software body had predicted in February.
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2 replies
tradeswinger05 said Mar 12, 2011 22:42:42
If SAY gets relisted this year it will be great for the stock. Company will regain credibility with audited #s with potential clients and investors. When the stock gets relisted again, I see a rally similar to that of which it fell when it was delisted; approximately 20% or more.
stockflip247 said Mar 14, 2011 16:06:21
Great news coming out recently with Cisco and early relisting. If the next quarter shows margins improving, I think the share price will start to reflect all of this good news.
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