Satyam needs loan!

The immediate task of the newly constituted board of the beleaguered Satyam Computer Services Ltd will be to find $120 million (Rs 550 crore) 'bridge finance',a senior company official told DNA Money on the condition of anonymity.

This money, provided either as a credit line by the government or banking institutions at concessional rates, is needed as working capital to run operations for a month.
"If we are provided this money we are confident of turning around the company with billings from customers," the official said.

The payment cycles are usually 30-60 days for the company but given the current market scenario, some clients are asking for a 80-days' credit, he said.

"While the $100-120 million will be just enough for a month, we will be able to tide over the remaining period through financial innovation," he added. A major chunk of this would have to be in dollars to service operations of Satyam abroad.

"Satyam has a running business notwithstanding what our former chairman said about revenues and the wafer thin margins he mentioned," he said.

"This is totally unbelievable as we have been generating business day in and day out that too at considerably high margins," he said, expressing a sense of betrayal by the disgraced former chairman B Ramalinga Raju.

V Balakrishnan, the chief financial officer of Infosys Technologies, India's second-largest software firm, doesn't think foreign funding agencies would come to the rescue at this point.

"It (Satyam) will have to tap traditional avenues such as domestic banks and institutions to finance working capital needs. They (company directors) would have to convince these agencies on the repayment capacity (of the company)," said Balakrishnan.

The finance head of another top IT company, who did not want to be named, said that the new board members face a Herculean task of setting right 'misstatements' (cooked books of accounts).

He said it was important to detect the elements involved in the scam and eliminate them first.

That, the finance chief said, was the first thing that the new directors have to do. "All these things need to be done sequentially and simultaneously," he said.

Ganesh Natarajan, chairman of information technology and IT-enabled services body Nasscom, said the new helmsmen and government backing would make it possible for the software major to raise funds.

Natarajan said liquidity is an issue that needs to be addressed by the reconstituted board immediately.

The Nasscom chief believes that Parekh, who has experience in such matters, will be able to take care of the issue quite competently.

"He (Parekh) will be crucial for tapping funds from private equity, and private and public sector banks for the company," he said.

Natarajan expects Karnik to get Satyam's business back on track and Achuthan to re-establish proper accounting standards in the IT company.

"Karnik would be able to maintain continuity in the company's business by taking care of the customers and employees," he said.