But will India’s outsourcing/offshoring image also take a hit? Nasscom president Som Mittal, said: “We are shocked with the disclosure of both the magnitude and content of fraud. The IT-BPO industry has high sets of corporate governance and this is an isolated case of governance failure. We are closely working with the Task Force set up by Satyam and our priority at this point is the 50,000 employees and customers of the company.”

Commenting on whether the software body will take any action against Satyam, Mittal said, “There are enough provisions in the law and we are not taking any action. The company will remain on Nasscom’s list. Also, the blame for such an isolated incident should not be put on the entire country or industry because such incidents have taken place in Europe and more recently, in the US.”

Funds exit: Some of the big institutional shareholders have already started exiting the company. On the BSE and NSE today, these shareholders sold 8.62 per cent of their combined holdings. Abardeen, one of the largest shareholders, sold the entire 5.6 per cent stake it had in Satyam, and Swiss Finance also exited. Stock Exchange data showed huge sales by Morgan Stanley and Fidelity as well.

Shock & dismay: The reaction from India Inc was one of shock and dismay. Infosys, India’s second-largest software company, called the incident “deplorable,” R C Bhargava, Chairman, Maruti Suzuki (and an independent director on many boards) admitted that “the Satyam episode has tarnished the image of independent directors at Satyam.” He wondered how the internal audit committee (mostly populated by independent directors) could have missed the irregularities.

JJ Irani, Chairman of expert committee to draft the new Companies Act, Director of Tata Sons, said, “This is a lesson for corporate houses and they should wake up to reality. In the new companies Act, we proposed to give more powers to independent directors. They are completely in the dark. They should be well informed and kept active.”

Rajeev Chandrasekhar, MP and President, Ficci, said, “This fraud on the investors and employees of the company shows a systemic breakdown in the audit and board oversight of the company. Questions will need to be asked about how this happened and who caused it to happen,” he added.

CII Director General Chandrajit Banerjee said the developments at Satyam need to be seen as exceptions to the rule because standards of corporate governance in India are among the highest in the world today.

Brokerage houses, on their part, were blunt. Hitesh Agrawal, Head (Research), Angel Broking, said: “This has shaken the confidence of investors — both domestic and global — the repercussions of which could be felt over the medium-term”.

In its note to its investors on Wednesday, CLSA, a brokerage house covering the Asia-Pacific markets, said: “In this scenario, the January 10 board meeting of Satyam now becomes irrelevant. When there is no cash, how can there be a buyback? And where did the cash go? Only an investigation can tell.”

A Credit Suisse statement, too, said the Satyam episode “clearly indicates that the current financials of Satyam cannot be relied upon. As such, we are unable to issue any further investment advice on Satyam and suspend our coverage of the stock”.

TRUE LIES -- What Raju owned up to:

-- Inflated cash and bank balances of Rs 5,040 crore
-- Non-existent accrued interest of Rs 376 crore
-- Understated liabilities of Rs 1,230 crore on account of funds arranged by Raju
-- Overstated debtor position of Rs 490 crore
-- Q2 ‘08-09 profit stated as Rs 2,700 crore and operating margin of 24% revenuesActuals: Rs 2,112 crore profit and 3% of revenues
-- Profits inflated over “last several years”; attained unmanageable levels as company grew
-- Aborted Maytas deal was “an attempt to fill the fictitious assets with real ones”
Source: Letter to Bombay Stock Exchange

SHOCK, AWE & DISGUST -- Reactions from India Inc:

* The next time you hear of a growth story, you may wonder whether it is ‘Satyam’ or ‘Mythyam’-- Kapil Dev Singh, Country Manager, IDC India

* We condemn and deplore the whole incident -- Suresh Senapati, CFO, Wipro Ltd