BANGALORE, Jan 7 (Reuters) - The chairman of India's embattled Satyam Computer Services resigned on Wednesday and said the company's profits had been inflated over the last several years, sending the stock down 60 percent.
The shocking revelation comes after India's fourth-largest outsourcer's botched attempt last month to buy two construction firms in which the company's founders held stakes and key customer World Bank dropping its ties with the outsourcing company.
'The gap in the balance sheet has arisen purely on account of inflated profits over a period of last several years,' Satyam Chairman Ramalinga Raju said in a statement to stock exchanges on Wednesday.
Satyam's woes make it one of India's most high-profile company scandals in recent years. The comments from Satyam sent Indian equity markets in a tailspin, with Bombay's main benchmark index falling 3.9 percent.
Satyam, which specialises in business software and back-office services for clients such as General Electric , and Nestle, was due to hold a board meeting on Jan. 10 to consider a buyback following a rash of broker downgrades even after the acquisitions were called off.
'I think there is no future for this stock. This case for India is similar to what happened to Enron in the U.S.,' said Jigar Shah, senior vice-president at Kim Eng Securities.
'It will not stop at Satyam. Many more companies will come into scrutiny like that. There is a strong possibility investments in India will be affected.'
(Reporting by Sumeet Chatterjee; Additional reporting by India bureaux; Writing by Anshuman Daga; Editing by Jean Yoon) Keywords: SATYAM/ (sumeet.chatterjee@thomsonreuters.com; +91-80-3982 7450; Reuters Messaging: sumeet.chatterjee.reuters.com) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
The shocking revelation comes after India's fourth-largest outsourcer's botched attempt last month to buy two construction firms in which the company's founders held stakes and key customer World Bank dropping its ties with the outsourcing company.
'The gap in the balance sheet has arisen purely on account of inflated profits over a period of last several years,' Satyam Chairman Ramalinga Raju said in a statement to stock exchanges on Wednesday.
Satyam's woes make it one of India's most high-profile company scandals in recent years. The comments from Satyam sent Indian equity markets in a tailspin, with Bombay's main benchmark index falling 3.9 percent.
Satyam, which specialises in business software and back-office services for clients such as General Electric , and Nestle, was due to hold a board meeting on Jan. 10 to consider a buyback following a rash of broker downgrades even after the acquisitions were called off.
'I think there is no future for this stock. This case for India is similar to what happened to Enron in the U.S.,' said Jigar Shah, senior vice-president at Kim Eng Securities.
'It will not stop at Satyam. Many more companies will come into scrutiny like that. There is a strong possibility investments in India will be affected.'
(Reporting by Sumeet Chatterjee; Additional reporting by India bureaux; Writing by Anshuman Daga; Editing by Jean Yoon) Keywords: SATYAM/ (sumeet.chatterjee@thomsonreuters.com; +91-80-3982 7450; Reuters Messaging: sumeet.chatterjee.reuters.com) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
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