Satyam barred from World Bank business

The World Bank has declared Indian outsourcer Satyam ineligible to receive direct contracts from the bank under its corporate procurement program for eight years.

Satyam has been declared ineligible because it provided improper benefits to bank staff and failed to maintain documentation to support fees charged for its subcontractors, the World Bank said Tuesday.

The decision was effective in September and came after a temporary suspension that took effect in February, the bank said.

The statement by the bank follows news reports that Satyam was involved in malicious attacks on the bank's information systems, and tries to set the record straight, according to sources close to the situation who requested anonymity.

There is no evidence that Satyam was involved in malicious attacks on the bank's information systems, the statement from the World Bank said.

Satyam, India's fourth largest outsourcer, declined to comment on the statement. "Satyam does not discuss individual clients," a Satyam spokeswoman said on Tuesday.

While it is not known what the direct impact will be on Satyam's revenue from the loss of business from the World Bank, the manner in which the outsourcer was shown the door adds to earlier allegations of poor corporate governance at the company in connection with its moves to get into the construction business.

Bowing to investor pressure, Satyam said last Wednesday that it had changed its mind about the proposed acquisition of two construction companies, Maytas Properties and Maytas Infra. Satyam had announced just the day before that it was investing in construction companies, in a bid to deliver higher shareholder value in an otherwise challenging environment.

Investors, however, pushed down the price of the company's shares by about 55 percent in trading on the New York Stock Exchange, as doubts were raised by analysts whether Satyam was justified in investing its cash in the construction business, even as its main outsourcing business was going through difficult times.

Investors were also annoyed that the Raju family, which has a dominant stake in Satyam, is a key investor in the construction companies.

The IDG News Service is a Network World affiliate.