Vineet Nayyar, Satyam"s chairman said “We have decided that it is not possible for the company to become current as per the US SEC (Securities and Exchange Commission) regulations. There were certain data that were not available to the company following the fraud committed by the earlier management."
"The non-availability of those numbers was pointed out by the auditors while auditing the financials. Though the Indian regulator was accepting the auditors" comments, the US regulator was not. So we have decided to wind down the ADS programme," he further added.
During a recent auditor review of the accounts, some information was missing that includes the alleged investment of about Rs 1,232 crore made by the founder of Satyam B Ramalinga Raju.
This is not the first time, Satyam has not been able to file the required documents with the SEC post September 2008 because of financial irregularities identified for earlier years. Although, Nayyar said that SEC officials were cooperative to work with the company to set the records straight. However, the company come to the conclusion that the company will not be able to comply with the regulations of the SEC and hence has decided to withdraw from the American market.
The US listed ADSs represent 9.13% of the equity. According to the norms of winding the programme, the first step of the company is to distribute notices to the ADS holders within the next week. Then there shall be a transition period ranging from six to eight months. During the said period ADS holders will surrender their ADSs to the depository, in this case Citibank, in the US. The ADSs will be eligible for underlying equity shares on conversion.
As the shares continue trading on the BSE and NSE, the converted shares will be eligible for trading on Indian bourses. The ADS holders after conversion of their receipts into equity shares could sell their shares in India and take their money back. Once the entire process is completed, the company will not be held accountable for filing its reports with the SEC. Also there will not be any trading of the company"s securities in United States.
This will not have any impact on the company"s business in the US or the trading of the shares in India," Nayyar said.
Analysts' view is that once the equity shares would increase float thereby affecting the price of the shares on the Indian bourses. Nayyar's response to this was, “We are doing this unwinding in an orderly way so that the markets absorb the shares coming for sale."
Earlier, Satyam had to settle the lawsuits in US with the American shareholders after Ramalinga Raju had confessed to the accounting fraud in January 2009.
One of the analyst said, that this unwinding of the company will make is easier for the company to complete its merger process.