“India’s Enron”: The Saga Continues

Even a few months ago, India promised to be more resilient in the global downturn than other battered economies. After Satyam Computer’s (SAY) revelations of a $1 billion accounting fraud, however, it looks far from possible. It has been a week since India’s biggest corporate scandal came to light and the markets are still reeling from the shock.

The Indian IT sector, which generates more than half of its revenue from outsourced work from the United States, has taken the worst hit. Already grappling with the effects of the recession, it may see delay in large contracts from global firms after the Satyam fiasco.

The Securities and Exchange Board of India (SEBI), now faced with the challenge of avoiding such fraud in future, will review papers of auditors who cover stocks listed on the Sensex 30 and Nifty 50.

While some companies are apprehensive about overscrutinization, more skeletons are bound to tumble out of the closet. Outsourcing giant Wipro has already revealed that like rival Satyam, it was also blacklisted by the World Bank in 2007.

Indian shares fell more than 3% today, their lowest close in over 5 weeks, while Wipro tumbled as much as 12% to a three-month low. Satyam investors however saw a ray of hope after Indian Trade Minister Kamal Nath said the government may provide financial aid to the company.

Satyam shares fell more than 82% to $1.66 on the New York Stock Exchange on the back of multiple class-action lawsuits and speculation on the exodus of high-profile clients like General Electric Co. (GE).

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