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New board offers rescue hope

SATYAM Computer Services Ltd climbed yesterday by the most in 16 years in Mumbai trading on speculation that a new government-appointed board will draw up a rescue plan for the company.

Satyam rose 55 percent to 36.75 rupees as of 10:39am in Mumbai, the most since at least November 26, 1992. The stock lost 87 percent in the last two trading sessions after Chairman Ramalinga Raju said he falsified the accounts and quit.

The Bombay Stock Exchange's Sensitive Index fell 2.7 percent yesterday.

Deepak Parekh, chairman of Housing Development Finance Corp, and two other state-appointed directors were planning to hold their first meeting in Hyderabad yesterday to guide the company out of the financial and legal fallout of the fraud. Parekh has been joined on the board by Kiran Karnik, ex-president of the nation's software industry lobby group, and former regulator C. Achuthan.

"Though the news of the new board at Satyam is positive, it will be important to track the incremental news flows as they start assessing the state of the company," said Sandip Sabharwal, chief investment officer at Mumbai-based JM Financial Mutual Fund. The stock's gain could also be "because of investors covering their shorts in Satyam as the company's stock will be excluded from the derivatives trading," Sabharwal said. Satyam shares will be removed from the futures and options trading list on January 29, Bloomberg News said.

Survival battle

The Hyderabad-based computer-services provider and its more than 50,000 employees are battling for survival after founder Raju and his brother Rama were arrested for an alleged US$1-billion fraud in which income was overstated for many years.

The shares began dropping after Satyam announced on December 16 that it planned to buy two unrelated companies controlled by the Raju family for US$1.6 billion. The Indian software provider now faces lawsuits from investors in the United States.

The software maker will have to restate earnings and may be broken up to avoid an exodus of clients and shield potential buyers from lawsuits and regulatory probes, executives said.

"The way to salvage the business is to house it in another company and then sell it. There will be takers for it without the liabilities," said Rajendra Chitale, managing partner at MP Chitale & Associates, who worked with Parekh a decade ago on the rescue of India's biggest mutual fund. "It will be like selling the family jewels and paying off the liabilities."



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