The Rise of Satyam 1987 : Satyam Computers Pvt. Ltd. Born. 1991 : June - First Fortune 500 Client. August - Converted into Public Ltd. Co. 1994 : The Big Break- Allies with Dun and Bradstreet Corp. 2000 : • Declared one of the 100 most pioneering technology companies by World Economic Forum. • Dataquest IT Man of the year award. 2002 : CNBC’s Asian Business Leader – Corporate Citizen of the year Award.
ACHIEVEMENTS Fastest growing company of India listed in three international exchanges i.e., NYSE, DOW & EURONEXT. Winner of Innovation award for partner excellence in both 2007 and 2008 for giving significant business value. UK trade & investment India (UKTI) Business award for corporate social responsibility. Golden peacock award for excellence in Corporate governance.
THE DISASTROUS REVELATION• The Black day: 7th January, 2009• Accounting fraud of over 7800 crores rupees From past 7 years accounting books were cooked: 1. Profits were inflated. 2. Understated liability and overstated debts. 3. Accrued interests. 4. The gaps in the balance sheets are due to the Inflated profits.
CONFESSION LETTERRaju wrote in the confession letter : “Every attempt to fill the gap failed & quote” .It was like riding a tiger, not knowing how to get off without being eaten”.
CONFESSION LETTER Maytas Acquisition Last attempt to fill the gap. Top officials were unaware Only MD and CFO were others. No personal profits Did not sell any shares from 8years.
M MMMMMINUTES AFTER REVELATION MINUTES AFTER REVELATION
IMPACT OF SCAMStock Market Share-holders Indian economy Stake-holders Employees Company Logo
SATYAM SHARES Biggest single day fall for a stock in stock market. 77% Rs. 175 ( Jan 6th) STOCK MARKET BSE sensex fell by 749.05 i.e., 7.25%. NSE fell by 192.40 points i.e., 6.18%. COMPANIES WORTH 11464 crore 1607 crore. All time low of Rs.11.50 on 9th Jan and closed at Rs.23.75/- Compared to highest of Rs. 524.90/- on May 29,2008.
ILLUSIONISTB.RAMA T.SRINIVAS RAJU V. RAMALINGASRINIVAS RAJU S. GOPALAKRISHNA
THE ILLUSIONIST Ramalinga Raju : Satyam former chairman B Rama Raju : Brother of Ramalinga Raju Former Managing Director V Srinivas : Ex-Chief financial officer S Gopalakrishnan : Price Waterhouse Auditor Talluri Srinivas : Price Waterhouse Auditor
CFO revealed during investigation Started 6-7 years ago. 10 crore was inflated to 200 crore in balance sheet. This marginal gap went on expanding over years. 7800 Crore fraud Company Logo
IMPORTANT DATES AND EVENTS Dec 16, 2008 - decision to buy stake in MAYTAS infrastructure . Dec 17, 2008 - Satyam call of the MAYTAS deal as a result of investor revolt. Dec 18, 2008 - Satyam announces a board meeting on 29th in wake of investor revolt.
IMPORTANT DATES AND EVENTS (Contd..) Dec 19, 2008 Post MAYTAS U-turn, Unpaid files motion against Satyam and promoters for $1.1 Billion claiming fraud. Dec 23, 2008 World bank confirms an 8 year ban of Satyam for data theft and bribery . Dec 28, 2008 4 Board members resign in wake of MAYTAS controversy and board meeting postponed to Jan 10th 2009.
IMPORTANT DATES AND EVENTS (Contd..) Jan 3, 2009 Promoter stake in Satyam coming down to less than 5%. Jan 7 & 8, Mr. B. R. Raju resigns and cites 2009 financial irregularities in the book of accounts to the tune of $1.5 Billion.
Among the “BIG 4”. Other 3 are: SATYAM AUDITORS Deloitte KPMG Ernst &Young PRICE WATERHOUSE s COOPER Functions:Finance & Accounting, Performs non-core internal audit, tax functions of compliance, logistics Organization & human resources.
The Auditors - PWC PwC was paid 3.53 crore for the year 2008 Comparatively, same industry Infosys paid 1 crore
PwC - Partners in Crime ??? Previous record - Satyam has also been accused of frauds in 2001 and 2003. No importance was given to this. Getting third party evidence - No bank confirmation on fixed deposits Accrued interest(fixed deposit) Debtors confirmation Factors overlooked - Changing of accounting years Huge debt despite cash surplus
PwC - Partners in Crime ??? What could have been sensed ? Excess cash: No distribution among share holders nor invested to earn valuable interest Operating margin: Peer companies - 20-25% Satyam - 3% Recession: Huge profits compared to others always a chance of creative accounting.
PROBABLE REASONS PRESSURE TO MEET Growing Competition EXPECTATION Threat of being overtaken OVERCONFIDENCE On his ability Siphoning of fundsPERSONAL BENEFITS Salary of non-existent 13000 employees“Since about seven years we wanted to show more income in theaccounts to avoid others from involving in the company affairsand any possible hostile acquisition.
WHY DID RAJU CONFESS The gap in the balance sheet reached unmanageable proportions and could not be filled anyhow in future. The whistle blower whose email to a Satyam board member triggered a chain of events .
IMPACT OF SCAM ON THE NATION Jobs of over 50,000 technocrats were at risk. Country’s booming economy feared slight collapse as countrys GDP fell by estimated 0.4%. India’s IT sector suffered downturn as its image was tarnished globally. World Bank barred Wipro, Mega soft and 3 other IT companies after the Satyam debacle.
CBI filed a charge sheet against nine on April 7,2009.Apart from illusionist four others are :- Rajus second brother S. Raju- 2 employees from finance wing- Vice president (finance) CBI investigating further
SATYAM UNDER RECONSTRUCTION Appointing new board. Board appointed by government : • former Nasscom chief – Kiran Karnik, • Chairman HDFC – Deepak Parikh • Former SEBI member – C. Achuthan . Satyam shares gained over 44% day after appointment of the new board. New CEO – A S Murthy Tech Mahindra acquired Satyam on April 13,2009.
BREACH OF BUSINESS ETHICS Lack of corporate governance Lacks financial disclosure & transparency Damaged relation with stake holders including employees , investors etc. Inequitable treatment of shareholders Zero integrity Wrong code of conduct Falsification Alteration Creative accounting Cooking the books Window dressing