PWC faces a big challenge in India after Satyam Fiasco

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PWC faces a big challenge in India after Satyam Fiasco

AIT News Network
Friday, January 16, 2009

Mumbai. PWC India which is said to have done a Billing of over Rs 800 Crore last year, now faces a Big challenge post Satyam fiasco. The challenge is not only to retain the clients but also 100 odd Partners and hundreds of employees who are already a worried lot as only a part of their compensation is fixed and major component of compensation depends on the profit earned by the Firm. If a Partner gets Rs 2 Crore Per Annum; his compensation of Rs 60 lakh is assured , whereas remaining Rs 1.4 Crore may be in terms of share in profit earned by the Firm. Similarly if an employee gets Rs 40 Lakh; out of this Rs 20 Lakh may be assured and remaining Rs 20 Lakh may be in terms of Bonus he gets out of the profit earned by the Firm.

But if the clients start moving after its reputation in India has allegedly nosedived Post Satyam disclosures; its Business may shrink and Billing may go down considerably according to buzz going around if there is an exodus of clients as the Boards of many Companies which it is Auditing may go for rotation of Auditors for 2009-2010. Since the Board requires approval of shareholders for appointing an Auditor; there is no immediate impact on the Businees but the real impact will be witnessed from next financial year. It is not only the Auditing Business, but Valuation, merger & Acquisition, Advisory and other Business of the Firm may get affected as the Stamp of PWC which was considered “Ultimate” by the Companies for attracting Investors and shareholders is no more in demand in India after its credibility has been questioned in certifying the Accounts of Satyam and its Role is being probed by several Agencies including Serious Fraud Investigation Office, SEBI and ICAI. It also faces the class law suits by US Law Firms on behalf of US investors who may implicate it as defendant for claiming damages on ground that their investments were based on the certificates given by PWC that the accounts of Satyam are accurate and reliable. Whether PWC played blind in Satyam or it had any role will depend on the outcome of investigations but it may require to make provision for a huge amount towards cost of litigation.

But if the Billing goes down considerably; then how much profit a Partner will get and how much Bonus an employees will get is anybody’s guess. The situation may even lead to emergence of Big 3 instead of Big 4 in India if the Firm is unable to renew its contracts with existing clients. If the clients move; many Partners and employees may also move as none wants to remain in a sinking ship. Those who are working in Big 4 have their market value only in Big 4 and when they move; they naturally go to rivals in normal course as after getting a comfortable Package they cannot think of struggle of setting up their own practice as they realize that they are not handling their own clients but the Company’s clients. There are also no takers for hourly charges of Rs 5000/- to Rs 20000/- if the same people start their own practice. A Country Head (Indirect Tax) of a Big 4 was recently fired by the Company; he is unemployed for last several months and is still awaiting an offer from other 3 Companies of Big 4 to whom he has applied for a job.

The clients’ list of PWC is like Who’s who of Indian Corporates.

The clients of PWC are said to include MNCs and Indian Corporates like Bayer CropScience , Bimetal Bearings, Blue Dart Express, Bosch , Century Enka, Chemplast Sanmar, Colgate Palmolive, Coromandel Fertiliser, Cummins India, Denso India, Gabriel India, Gateway Distpark, Glaxosmith Pharmaceutical Limited, GlaxoSmith Consumer Health Limited, Glenmark Pharma , GMR GMR Infrastructure, Goodyear India , Gujarat Gas Company, HCL Infosystems, HCL Technologies, Honeywell Auto, Info Edge, Ingersoll-Rand, Insilco , Kesoram Industries, Lanco Infratech , Marico Industries, Maruti Suzuki, Mastek, Max India, Mcleod Russel, Moser Baer, Motherson Sumi, NDTV, Nicco , NIIT Technologies, Orissa Extrusion, Parry Agro Industries, Phillips Carbon , Piramal Health, Piramal Life, Rane Brake, Religare , Samsung, Saint-Gobain, Samtel Color, Saregama India, Satyam Computer, Simplex Infra, Stewarts & Lloyd, Sulzer India, Swaraj Mazda,T.V. Today, TIL, Tinplate Company, Trigyn Technologies, Tudor India, United Breweries, United Spirits, Usha Martin , UT, UTV Software, Welspun India,Wyeth and Zensar Technolgies.

But how many of them will renew their retainership or relationship ; only time will tell. Global Management of PWC will have to burn midnight oil in making a strategy for retaining the clients as well as people. It is a challenge which will be unprecedented for its survival in India as till now it did not require any marketing effort for getting businees in India as its Brand was enough for getting business. But the Brand Value has changed with the time.

It is high time that Global Managements of Big4 (PWC, Ernst & Young, KPMG & Deloitte) should also go for compulsory transfer of their Partners from one station to other every 2 years to avoid situation like this. An irregularity which remains unnoticed by naked eye of an Auditor as he played blind; can be noticed by another Auditor. Several Partners of Big 4 are stationed at one station for over a decade and their remaining at one station has also become expensive to the Companies in many ways as when they leave the Company; they move with the Team and the clients giving a jolt to Company itself as their long stay at a station results in their having a good hold over the clients. Tax Department also transfers Officials from one station to other to avoid any nexus between Tax Officials and assessees.

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