Insider A S Murty is new Satyam CEO

February 6, 2009

Ending the suspense surrounding the appointment of a chief executive officer (CEO) for the scam-tainted Satyam Computer Services, the government-nominated board today appointed A S Murty, a Satyam veteran of 15 years, for the top job with immediate effect.


The board, chaired by C Achuthan, also appointed Homi Khusrokhan — former managing director of Tata Chemicals — and Murugappa Group’s former director (finance) Partho S Datta as special advisors to the board to help in management and finance respectively.

"I have no misgivings about the enormity of the task in front of us, but together with my colleagues, I am confident we can accomplish the impossible. We will chart a precise and practical 30–60–90 day plan that will encompass and address the interests of all stakeholders," Murty (known as ASM) said.

The special advisors, along with Boston Consulting Group, will work pro bono and help the newly-named CEO and the board in defining priorities and executing them effectively, stated a company release.

"Having led large organisations before, I expect this opportunity to be a singularly enriching experience and I look forward to contributing my mite to this noble task," Khusrokhan said on his new role as the special advisor to Satyam.

Board member Deepak Parekh said, "In our interactions over the past few weeks, we are convinced that Satyam needs an internal leader to steer it at this critical juncture and ASM has the required bandwidth and support."

Earlier this month, in an interview to Business Standard, Minister of corporate affairs Prem Chand Gupta too had said: "I personally recommended that a CEO should be an insider... since it will take quite some time for a CEO from outside the company to take stock of a new business. And we do not have much time". He explained that the government also wanted a person for the top post who understood the client market closely and Satyam "does have many such good people".

But is this an interim measure? The CEO's name could have been announced earlier, say sources, but the new Satyam board was seriously mulling the buyout options that emerged with the interest of numerous suitors in the company.

The names include that of Larsen & Toubro and B K Modi-owned Spice group (both asking for management control), Mahindra & Mahindra, Hinduja group, Essar group (Aegis BPO), HCL Technologies, Tech Mahindra and iGate. Other unconfirmed names include that of Fijustu, Hitachi and IBM. However, most of these suitors are believed to have asked for time before they present a concrete proposal. Besides, they are also waiting for the Securities and Exchange Board of India (Sebi) to issue details about the relaxed norms in case of an open offer for Satyam-like cases.

Could the board have made this appointment sensing the urgency to restore investor and client confidence in the company? The reaction is mixed. An L&T has expressed an interest in management control, said the company does not want to comment on the new appointment, but B K Modi, Chairman, Spice Group, said in a telephonic call from Kuala Lumpur: "An insider has been named as the CEO as they did not have any choice. No CEO was willing to come from any other company, as there is no clarity or stability. The present board, is in an interim board, and has been appointed under the Company Law Broad. No CEO wants to join this board."

On the question whether Spice group continues to be interested in Satyam, Modi said: “Yes, we are still interested in Satyam. We are only seeking transparency, if the government decides to offload stake to private companies.”

Vineet Nayyar, vice chairman and managing director, Tech Mahindra, said it was "a very good step. This will bring stability to the company and create a sense of trust among the employees".

He added, however, that this "still does not solve the basic problem of Satyam and that is getting the books cleared, liabilities issue, and customer retention".

Aparup Sengupta, MD and CEO, Aegis, said: "We have expressed our desire to the board to acquire the BPO operations of Satyam Computer Services, but the board has not replied to us. I do not want to comment on the appointment as I do not know A S Murty. However, the advantage, will be that since he is from within he will have a knowledge about operations."

But problems persist: Lack of clarity on Satyam is already taking a toll on the company's stock, with the scrip falling the third consecutive day. Today's fall was almost 8 per cent down to close at Rs 46.25 on the Bombay Stock Exchange (BSE) after news that the National Australia Bank has decided to suspend new outsourcing contracts awarded to Satyam, a spokeswoman for Australia's largest lender told Reuters.

Satyam continued to work with NAB on existing engagements, she said. Last month, Satyam said US-based State Farm Automobile Insurance had terminated its outsourcing contract.