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Satyam says client confidence improving

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CIOL Bureau
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MUMBAI, INDIA: Fraud-hit Satyam Computer Services Ltd is reassuring wary clients about its long-term prospects and will be able to pay staff their February wages, its new chairman said on Wednesday.

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Satyam India's No. 4 software exporter, was plunged into a crisis last month after its founder Ramalinga Raju quit after disclosing profits had been overstated for years and $1 billion of cash and bank balances did not exist.

"After the first knee-jerk reaction, there is now greater comfort and stability among the clients. Obviously there are questions about the long-term future of the company and we are interacting with them on this," said Kiran Karnik, who was last week appointed chairman of Satyam's reconstituted board.

He told reporters Satyam was in a position to pay employee salaries for February mainly from receivables, and said arranged bank funding would be coming in a few days.

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Satyam said last week it had secured 6 billion rupees ($123 million) in bank loans to meet its short-term operational needs.

Shares in Satyam rose 6.7 percent to close at 47.15 rupees on Wednesday. The company's market value has plunged to about $650 million from about $7 billion in May 2008.

BOARD MEET

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Last week, National Australia Bank, Australia's largest bank, said it would suspend new contracts awarded to Satyam, and State Farm Insurance Co ended its contract in January.

Karnik said Satyam had picked up some additional work, which showed it was back on track, but noted client concerns remained.

A Satyam spokeswoman said on Feb. 3 the company had been awarded 15 new contracts in January. In a staff newsletter dated Feb. 9, Satyam said it had got assurances from "significant majority" of customers that they would continue their ties.

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Satyam also said in the newsletter that A.S. Murty, its new chief executive, would meet with key customers in the next two to three weeks.

Satyam's government-appointed board meets in Mumbai on Thursday, and Karnik has said a long-term action plan, including a possible sale, would be ready in the next week or so.

On Wednesday, he said Satyam had been approached by many potential suitors, but a formal sale process was yet to begin. The board has appointed Goldman Sachs (GS.N) and Avendus, an Indian investment bank, to look for strategic investors.

Top engineering firm Larsen & Toubro (LART.BO) owns a 12 percent stake in Satyam and is seen as the leading contender, while diversified Indian business houses Spice Group and Hinduja Group have shown interest among others.

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