Satyam fraud puts its future in doubt; shares plunge

By Sumeet Chatterjee

HYDERABAD, India (Reuters) - Satyam Computer Services' shares plunged to an 11-year low on Friday as analysts said India's biggest corporate scandal in memory called into question the future of the outsourcing firm.

Stand-in CEO Ram Mynampati has said the company, whose market value has shrivelled to $330 million from over $7 billion just six months ago, faces a crisis of unimaginable proportions following chairman and founder Ramalinga Raju's admission of years of accounting fraud on Wednesday.

Satyam's board -- what's left of it after Raju, his brother and four independent directors quit or tendered their resignations -- meets on Saturday to consider options that might include inviting a takeover or strategic investor, appointing an investment banker, and deciding what to do with the latest quarter's results, which have to be published this month.

The chief financial officer has also offered to resign after Raju's admission that profit had been overstated for years and that about $1 billion, or 94 percent of the cash and bank balances on Satyam's books at end-September, did not exist.

"There's a big question mark over everything. We don't know what kind of business model they have now," said Amar Ambani, vice-president of research at broker India Infoline.

"Raju's declaration says that at the operating level the margin was 3 percent, so at the net level it must have been a loss, which makes it extremely unviable. They have been borrowing to pay salaries, which means they have no cash at all."

Satyam shares slumped to 11.50 rupees (24 U.S. cents), their lowest since March 1998 and a far cry from a 2008 high of 544 rupees, before ending down 40 percent at 23.85 rupees.

The stock has fallen 87 percent in two trading days, pulling the broader market down. But shares in Satyam's main rivals, Infosys, Tata Consultancy Services and Wipro, rose on expectations they would pick up clients.