India's Satyam offers $125mn to settle US suit

Feb 17, 2011

Indian software exporter Satyam Computer Services said Thursday it will pay $125 million to settle a US class action suit, saying the step ends uncertainty over the fraud-hit firm's recovery.

The Hyderabad-based company, whose former chairman admitted overstating accounts to the tune of more than $3 billion, said the court in New York still needed to formally approve the deal.

But if given the go-ahead, it "would release, among other things, (the plaintiffs') claims against the company," it said in a statement to the Bombay Stock Exchange.

At least two class action shareholder suits were launched in the United States after former chairman B. Ramalinga Raju confessed to one of India's biggest corporate frauds in January 2009.

He is currently on trial with a number of former top executives on a string of charges, including conspiracy, cheating and forgery.

The company, now known as Mahindra Satyam, was bought by the mid-sized outsourcer Tech Mahindra, a unit of the tractors-to-holidays conglomerate Mahindra and Mahindra, in April 2009 for $600 million.

Last week, the company reported an upturn in quarterly net profit, sending its shares soaring and boosting confidence about the firm's recovery.

A relieved Mahindra Group vice-chairman and managing director Anand Mahindra wrote on his Twitter account Thursday: "Class action suits settled. Last sword hanging over Mahindra Satyam removed."

Current chairman Vineet Nayyar earlier said the settlement brings to an end all legal liability against the firm in the United States and described the class action as "the biggest question mark" for the future of the company.

"We had extended negotiations and last night we have signed an agreement to pay the amount as compensation," Nayyar told reporters in a conference call.

The settlement would be paid through the company's reserves, which stand at $444 million, he said, adding: "We will have no problems in raising the money."

The US judge is expected to give a preliminary verdict in a month, with a final judgement by mid-2011, Nayyar told reporters.

Nayyar said he was confident that any legal liability arising from the United States would not go higher.

"We see it capped at $125 million," he added.

Satyam Computers announced in September 2010 that it was to delist from the New York Stock Exchange as it was not able to meet the US deadline to file restated financial accounts.

On the Mumbai exchange, its shares rose as much as 6.14 percent, or 3.85 rupees, to 66.5 after Thursday's announcement, before closing at 63.6, up 1.52 percent.

Dipen Shah, an analyst at Mumbai-based brokerage Kotak Securities, told Dow Jones Newswires that the settlement removed "one of the major overhangs on the company", allowing investors to focus on its performance.

Explore further: Google's new CFO gets $70M for defecting from Morgan Stanley

add to favorites email to friend print save as pdf

Related Stories

India's fraud-hit Satyam seeks delisting from NYSE

Sep 24, 2010

India's fraud-hit software firm Satyam Computers said on Friday it plans to delist from the New York stock exchange as it may not be able to meet the US deadline to file restated financial accounts.

India's fraud-hit Satyam posts loss but is on the mend

Sep 29, 2010

India's fraud-hit Satyam announced Wednesday a loss of 27.6 million dollars for the last fiscal year as it reported its first earnings since an accounting scandal pushed the firm to the edge of bankruptcy.

Recommended for you

Yahoo boosts share buyback plan by $2 billion

6 hours ago

Yahoo on Thursday told US regulators that it will spend another $2 billion buying back shares as the pioneering US Internet search firm continues an effort to re-invent itself.

Uber ramps up safety efforts after criticism

Mar 25, 2015

Uber said Wednesday it was ramping up safety in response to rape allegations against a driver in India and growing concerns about background checks for operators of the popular ride-sharing service.

User comments : 2

Adjust slider to filter visible comments by rank

Display comments: newest first

not rated yet Feb 17, 2011
ah now I know how India is growing...the same was as USA was "growing" around the time of the accounting scandals.
not rated yet Feb 17, 2011
A condition of any settlement should be the public release of all court documents.

Please sign in to add a comment. Registration is free, and takes less than a minute. Read more

Click here to reset your password.
Sign in to get notified via email when new comments are made.