Tuesday, January 20, 2009

Satyam may have inflated employee count

Satyam Computer Services Ltd may have up to a fifth fewer staff than the Indian outsourcing company has said it has, the Economic Times said on Tuesday, citing an unnamed source familiar with a fraud probe.

The newspaper said the Serious Frauds Investigation Office believes Satyam's headcount could have been inflated by 15-20 percent to siphon off money as salary payments to non-existent employees.

"Since a major chunk of the costs were actually salaries, a minor distortion in the number of employees could change the personnel expenses significantly," the paper quoted the source as saying.

Asked to comment on the report, a Satyam spokeswoman told Reuters: "We believe the numbers are accurate at this point of time."

The Economic Times also said engineering and construction firm Larsen & Toubro had appointed Japan's Nomura to advise it on a possible deal with Satyam, in which it already has a stake of about 4 percent.

A spokesman for Larsen said the company does not comment on market speculation.

The newspaper also said unlisted Aegis, part of India's Essar Group, was interested in buying Satyam's business process outsourcing (BPO) business.

"As a group, we constantly look at opportunities in sectors where we are. We would not like to comment on specific proposals," an Essar spokesman said.

Manpower expenses constitute more than 60 percent of total costs at Satyam, and investigators say the ratio of manpower cost to revenue has remained constant over the past three years despite an increase in the number of employees, the Economic Times said.

The company's website says it had close to 53,000 staff, including those in subsidiaries and joint ventures as at end-September, and it has since said that around 2,000 staff have left.

Satyam, India's No.4 software services exporter, was plunged into crisis after founder Ramalinga Raju resigned as chairman earlier this month, revealing profits had been falsified for years and $1 billion of cash on the books did not exist.

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