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27 May 2024

Satyam loses US-based customer

By Reuters

Fraud-hit Satyam Computer Services of India said a US-based client had cancelled its contract, dealing a blow to the embattled Indian outsourcer caught in the country's biggest corporate scandal.

State Farm Insurance has terminated its contract, a Satyam spokeswoman said, confirming a report in India's Mint newspaper, but she declined to give details of the contract.

"While we are disappointed in State Farm's decision to discontinue services, our executives are reaching out to clients around the world, and at this point, well more than 90 per cent of our clients have committed to continuing with us," she said.

The Mint newspaper said State Farm Insurance was among Satyam's biggest clients.

Satyam, India's No4 software services exporter, was plunged into crisis after Ramalinga Raju resigned as chairman earlier this month, revealing profits had been falsified for years and $1 billion (Dh3.67bn) of cash on the books did not exist.

A government bailout is seen as key to ensuring the company has enough cash in the short term and to restore flagging investor confidence, analysts said.

Some of Satyam's clients might cancel orders, wary of business risks in the fraud-hit company, analysts said.

"Any customer dealing with Satyam at this point in time will be quite concerned with what is happening at the company now," said RK Gupta, Managing Director at Taurus Asset Management in New Delhi.

A government-appointed board at Satyam said on Saturday it was looking for a new chief executive and chief financial officer for the outsourcing firm at the centre of a scandal dubbed as "India's Enron".

The board, which also discussed scheduling of vendor payments, said it had received expressions of support from important clients including Nestle and General Electric.