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Satyam scam

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This ppt contain all the information about satyam scam done by ramlingan raju and others...

This ppt contain all the information about satyam scam done by ramlingan raju and others...

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  • SCAM
  • Set up in the year 1987 by B.RamalingaRaju.India’s 4th biggest software company.The company was promoted by 2 brothers B Rama Raju and B RamalingaRaju.On 26th August, 1991 it was converted into a Public Limited Company and went for PUBLIC ISSUE in 1992.BSE IPO oversubscribed 17 times when made public.
  • It is listed in BSE, NSE, NYSE and Euronext (Amsterdam). The company employs 53,000 IT professionals across development centers in 6 continents.It serves over 654 global companies, 185 of which are Fortune 500 corporations.  
  • Satyam Computers had on  December 16, 2008,  announced that it will acquire two group firms owned by Chairman RamalingaRaju's sons - Maytas properties and Maytas Infra. The BOD of Satyam had approved the founder’s proposal to buy 51 per cent stake in Maytas Infrastructure and 100 % in Maytas Properties. The total outflow for both the acquisitions was expected to be US$ 1.6 billion comprising of US$ 1.3 billion for the 100% stake in Maytas Properties and US$ 0.3 billion for the 51% stake in Maytas Infra.
  • Upaid then filed a lawsuit in a Texas court in 2007 alleging that Satyam provided forged documents to Upaid in patents filing that eventually resulted in the company losing its patents infringement case against telecom giants Qualcomm and Verizon.
  • DSP Merrill Lynch informed SEBI about Material irregularities in Accounts on 6th JanMinutes of Meeting of 16th December,2008 were not submitted to RoC-(This created some doubts)Hearing of Upaid- satyam case on 8th Jan at the US court
  • Investors have lost a whopping Rs 13,600 crore ($2.82 billion) in Satyam[Get Quote] shares in less than a month, since the skeletons started tumbling out of the company's cupboards.The market capitalisation of Satyam fell to Rs 1,607.04 crore (Rs 16.07 billion) on Friday from Rs 15,262 crore (Rs 152.62 billion) at the end of trade on December 16, 2008, the day when Satyam announced an $1.6 billion acquisition deal of two firms promoted by the kin of IT firm's former chairman Ramalinga Raju. However, the company aborted the deal hours later after the investors dissent.The meltdown in the scrip wiped off as much as Rs 13,655 crore (Rs 136.55 billion) in just 19 trading sessions.The share price of Satyam plunged to Rs 23 on Friday from over Rs 200 levels on December 16, when the fiasco began. Investors received a rude shock on January 7, when Ramalinga Raju tendered his resignation and confessed to close to Rs 7,800 crore (Rs 78 billion) accounting fraud in the company. The stock had nosedived close to 80 per cent to Rs 39.95 after the starking revelations on that day.The major erosion in the market cap was suffered in the past two trading sessions which wiped off Rs 10,460 crore (Rs 104.6 billion) with the scrip plunging as much as 86 per cent since January 7.Analysts believe the scrip is likely to stagnate at Rs 20 levels even as the Satyam counter was among the most traded on the bourses."The scrip is stagnating at Rs 20 levels. But we cannot fix the valuation of the company based on the current price movement. The scrip is more of news report driven and struggling to find some ground," SMC global vice president Rajesh Jain said.Interestingly, Satyam shares had gained a combined 23 per cent in six consecutive trading sessions between December 26 and January 1, amid reports that the firm was ripe takeover target for rival IT firms and private equity investors.The stock had also gained after the company announced that the board would consider a buyback of shares in its meeting scheduled for December 29.However, the company had postponed the board meeting to January 10.
  • But once MrRaju sold shares to the Indian public in 1992 and later, went for a New York listing in 2001, pressure grew on him to improve the company's performance. Ever competitive, he was also in a rush to catch the market leaders, Tata Consultancy Services, Infosys Technologies and Wipro. Raju was obsessed with getting past the billion-dollar sales mark. When he got there, he wanted to post US$2 billion. Satyam posted US$2.1 billion (S$3.1 billion) sales in the year to March 31; 2008.With the ever-rising pressure to perform, Satyam began doctoring the books to show bigger profits by manipulating the balance sheet, a process that began several years back.
  • News of what is possibly the country's biggest corporate fraud, sent the indices tumbling. The benchmark Sensex slipped over 7%on Wednesday, 7 January 09. Companies perceived to have poor corporate governance standards were most affected.The company’s share price has fallen 21.3 per cent since December 15, the day before the crisis broke.
  • Liquidating assets and bringing in new investors aresome of the measures on cards with the board torescue Satyam.• As a part of high profile restructuring, DELOITTEand KPMG has been appointed as independentauditors to help restate the company’s financialreports.• The government superseded the board of Satyamand decided to appoint 10 nominee-directors.The new board will take a decision on a newmanagement team.
  • Transcript

    • 1. SATYAM
      SCAM
      "SINKING SHIP OR TIP OF ICEBERG"
    • 2. Company Profile
      • Set up – 1987 to provide services in IT sector.
      • 3. India’s 4th biggest software company.
      • 4. Chairman and founder – B. RamalingaRaju.
      • 5. On 26th August, 1991 it was converted into a Public Limited Company and went for PUBLIC ISSUE in 1992.
      • BSE IPO oversubscribed 17 times when made public.
      • 6. It is listed in BSE, NSE, NYSE and Euronext (Amsterdam).
      • 7. The company employs 53,000 IT professionals across development centers in 6 continents.
      • 8. It serves over 654 global companies, 185 of which are Fortune 500 corporations.  
      Company Profile
    • 9. ACHIEVEMENTS
      • First IT Company in the World Certified under ISO9001:2000
      • 10. Ranked Among India’s Top 10 Best Employers, 2004 and 2003
      • 11. Top 13 Best-Managed Companies in India.
      • 12. Corporate Citizen award for Corporate Social Responsibility.
      • 13. SAP Pinnacle Award 2008.
      • 14. Satyam Wins golden peacock award for excellence in Corporate Governance on Global level for 2ndtime.
      • 15. United Kingdom Trade and Investment India Business Award for Corporate Social Responsibility
    • Satyam Clients
      A total of 650+ Clients
      185 of the top fortune 500 Companies
    • 16. Satyam Board Structure
      Other Independent Directors
      B.RamaRaju
      Promoter & CEO
      B.RamalingaRaju
      Promoter & Chairman
      Ram Mynampati
      Whole time Executive Director
      SrinivasVadlamani Chief Financial Officer
      Dr M. Srinivasan
      Prof. Krishna G Palepu
      Mr. Vinod K Dham
      Mr. T R Prasad
      Prof. V S Raju
      Prof. M Rammohan Rao
      ISB Dean/
      Bharat electronics
      Sasken Communication/
      Hellsoft /Montalvo Systems and Newpath
      GTB/Dr. Reddy’s Laboratories
      Former CabinetSecretary /GMR Infra/ GVK Taj
    • 17. Satyam – Share holding Pattern
      Institutional & Non-Institutional Shareholders
      LIC 4.34%
      L&T 4%
      Lazard
      Aberdeen 13.16%
      Fidelity
      ICICI Prudential
      Citigroup
      JP Morgan
      Total Market capitalization was Rs. 15,262 Cr
      (still Dec 16, 2008 )
    • 18.
      • Announcement to acquire 2 group firms owned by Chairman RamalingaRaju's sons.
      • 19. 51% stake in Maytas Infrastructure and 100 % in Maytas Properties.
      • 20. US $ 1.3 billion - Maytas Properties and US$ 0.3 billion - Maytas Infra.
      • 21. Total outflow for both the acquisitions was expected to be US$ 1.6 billion.
    • So, How did it all begin?
    • 22.
    • 23. Time-Line
      16 Dec
      2008
      17 Dec
      2008
      26 Jan
      2009
      Satyam gets board approval for controlling stake in Maytas Infrastructure and Maytas properties as fully owned subsidiary for $1.6B (Rs. 8000 Cr.)
      Satyam backs out of Maytas deal citing investors protest
      Major Clients of Satyam express dissatisfaction.
      Contracts worth $200 million up for grabs
      Satyam shares plunge 55 percent in NYSE. BSE share plunges over 30%
      Board meeting to be held on Dec 29 for proposed buyback of shares
    • 24. Time-Line
      19
      Dec
      23 Dec
      206Jan
      2009
      20
      Dec
      World Bank bans Satyam for 8 years due to inappropriate payments to staff and inability to provide information sought on invoices
      British mobile solution provider Upaid files a law suit against Satyam in a district Court in the US over Maytas deal. May face $1 Billion in penalties
      Centre refers Satyam deal to Registrar of Companies (RoC)
    • 25. Time-Line
      26
      Dec
      28
      Dec
      26 Jan
      2009
      29
      Dec
      3 more Independent Directors resign. Mendu Rammohan Rao, Krishna G Palepu and Vinod K Dham
      Board meet initially scheduled for 29th postponed to 10th January
      1st independent director Dr. Mangalam Srinivasan resigns from Satyam board
      Board announces exploring option for buyback of shares to restore investor confidence
      Rumors in market about strategic takeover by IBM, Accenture
      Satyam asks DSP to review board structure
      Satyam objects to world bank statements, asks to apologies or face legal action
      IL&FS sells 44.1 lakh shares pledged shares of Satyam promoters in 1 day. Promoters equity reduced from 8.6% to aprrox 7%
      Promoters disclose that their entire holding in Satyam pledged with institutional lenders since 2006
    • 26. Time-Line
      30
      Dec
      02
      Jan
      26 Jan
      2009
      03
      Jan
      Satyam board confirms promoters stake to be around 5%. Further 3.2% still pledged.
      Post cancellation of deal, Maytas looks for raising $500 million through sale of equities and properties
      IL&FS sells further 44.27 Lakh pledged shares taking the tally to 1.5 crore pledged shares
      Satyam-Upaid case hearing over the Maytas deal in Texas court on January 8.
    • 27. Time-Line
      05
      Jan
      06
      Jan
      26 Jan
      2009
      Tech Mahindra (Revenues 3766 Cr.) offers to merge with Satyam (Revenues 8473 Cr.)
      Total pledged shares sold by IL&FS reaches 2.5 Cr. in last 13 days. Promoters stake down to 3.6%. Still a further 1.7% are pledged
      Promoters stake in the company down to 4.5%
      The Night Before 7th Jan
      Merill Lynch discovers serious irregularities in books of accounts and approaches regulator SEBI for further course of action and its inability to investigate further. DSP submits report to SEBI and Satyam management late night.
      SEBI considers proposal to make it mandatory for promoters and majority share holders to disclosed pledged shares to stock exchange
    • 28. Time-Line
      07
      Jan
      26 Jan
      2009
      09:45 A.M.
      Satyam Chairman Ramalinga Raju wrote letter to the company board
      Hunt for Raju brothers begin. Amid speculation over his whereabouts,  Raju is believed to have left for the United States in connection with a court case.
      ADR’s crash 90%
      Satyam BSE scrip falls 78%
      DSP snaps ties with satyam.
      Ram Mynampati takes over as interim CEO according to Raju’s letter
      Auditing firm PWC under scanner
      Satyam stripped of Golden Peacock award
      Govt. instructs RoC to review report
      NSE removes Satyam from its benchmark index Nifty.
    • 29. Time-Line
      08
      Jan
      09
      Jan
      26 Jan
      2009
      10
      Jan
      BSE to replace Satyam Computer with Sun Pharmaceutical in its benchmark index Sensex with effect from January 12.
      PwC in major trouble. Stocks of PwC clients take a major beating at the BSE and NSE
      Former CFO ValdamaniSrinivas remanded to judicial custody
      CFO ValdamaniSrinivas, who is the financial custodian of the company resigns
      Raju brothers arrested by the police on charges of criminal conspiracy, cheating, forgery, misappropriation of funds and criminal breach of trust.
      PwC shot back at Satyam, saying in a media statement that the auditing was based on the audit evidence provided by Satyam and in was accordance with applicable standards. 
      Market Capitalization of satyam falls to Rs. 1,607 Cr from Rs.15,262 Cr. on Dec 16 in 19 trading sessions.
    • 30. Time-Line
      15
      Jan
      13
      Jan
      14
      Jan
      16
      Jan
      26 Jan
      2009
      Government hands satyam case to SFIO
      Maytas stocks hit the lower circuit for 7th consecutive trading session
      23 year old employee of satyam commits suicide in Chennai
      The newly appointed 3 member board appoints auditing firm KPMG and Delloitte to assist it in cleaning the mess in the scam tainted company’s accounts
      The government expanded the three-member Satyam board to six to include S Balakrishnan of Life Insurance Corporation, Tarun Das, chief mentor of the Confederation of Indian Industry and T N Manoharan, former president of the Institute of Chartered Accountants of India
    • 31. STOCK CHARTING
    • 32. Fabricated Income Statements
      ‘Creative Account Practice’
      • Details of cash balances with Scheduled banks are not there in the
      Annual report
    • 33. UNDERSTATED LIABILITY 1230 Cr. Which was ARRANGED BY MR.RAJU
      Understated Liabilities
      Fraud Amount
      Overstated cash balances, Income receivables
    • 34. SATYAM Meaning
      TRUTH.
      Now, Satyam :-
      A Rs. 7000 cr
      LIE.
    • 35.
      • Pressure to improve the company's performance.
      • 36. Capture market.
      • 37. Achieve billion dollar sales mark.
      • 38. “It was like riding a tiger, not knowing how to get off without being eaten.”
    • Impact of Scam
      Share - Holders
      Indian Economy
      Stock Market
      Stake - Holders
      Employees
    • 39. Regulators investigating Satyam include
    • 40. Action Taken By Authorities
      Chartered accountants body ICAI constituted a six-member special committee to look into the auditing of crisis-hit Satyam Computer and will submit its auditing report on February, 11.
      The special committee will headed by ICAI Vice-President UttamPrakashAggarwal .
      ICAI council members –
      S L Dogra, Amarjeet Chopra;
      SubodhAggarwal ;
      Akshay Gupta ;&
      K R Maheshwari, a banker and chartered accountant.
      Government asked the Serious Frauds Investigation Office (SFIO)-- a body set up to crack complex white collar crimes-- to probe the financial irregularities in Satyam Computer Services and report its findings in three months.
      • This decision to refer Satyam to SFIO is based on the recommendation of the Registrar of Companies (RoC) in Hyderabad, who inspected the books of Satyam which were being fudged for the past 7 years.
      • 41. Raju was arrested on charges of cheating, fraud and and other criminal charges under various sections of Indian Penal Code (IPC).
      • 42. The Securities and Exchange Board of India (SEBI) officials came to Hyderabad to investigate the entire scam, but they could not do so as Raju was in the custody of CID.
      • 43. The former chief executive officer (CEO) of Satyam Computers, Raju and his younger brother Rama Raju were remanded to judicial custody by sixth additional Metropolitan magistrate for 14 days (ie till January 23) and both were shifted to Chanchalguda Central Jail near the city.
    • Liquidating assets and bringing in new investors.
      DELOITTE and KPMG has been appointed as independent auditors to help restate the company’s financial reports.
      Government superseded the board of Satyam and decided to appoint 10 nominee-directors.
      DEEPAK PAREKH set to be appointed Chairman (Chairman of HDFC ltd and HDFC bank), KIRAN KARNIK and CACHUTAN (legal expert).
      3 members of BCG has been appointed as a management advisor and is working to revive satyam.
      TARUN DASS (CII Mentor), TN MANOHARAN (former president of ICAI) and SB MAINAK are among other 3 board members appointed by the Government.
      Satyam board has appointed GOLDMAN SACHS & AVENDUS as its Investment Bankers.
      SEBI and government of India devise appropriate fair and transparent measures for enabling open bids.
    • 44. Why Govt. Mediated
      Govt. of India was very concerned about it’s Image in International Market especially IT , as it is also main source of foreign exchange for the country and drives economic growth of a country.
      Tosafeguard the Interest of small investors, So that faith can be restored in the market again.
      To take care of the employees working in Satyam. As it was never their fault for whatever happened. Their job has to be secured by the Govt. that too in economic recession time.
    • 45. Steps Taken After Satyam Fraud
      Introduction of new rules by the stock market regulator, making it compulsory for promoters of companies to disclose the percentage of shares pledged by them to lenders
      Appointment of Independent Auditors and Company Secretary by Company Law Board to conduct Audit of any private organization and time.
      Set-up of 5 member Committee to suggest how to implement effective compliance and Corporate Governance in private sector by CLB.
    • 46. Finally Satyam acquired by tech mahindra….
      Anand Mahindra, Chairman, Tech Mahindra, the new owner of Satyam, company post the Rs 2,890-crore takeover, giving hope and future to Satyam’s 45,000-50,000 employees. A moment of truth for Satyam and a victory for the government and the regulators.
    • 47.
    • 48. 32
      RajuRaju sat on the wall,RajuRaju had a great fall,Balance sheet died,Shareholders cried,RajuRaju made a fraud.
      RajuRajuYes Baba,Cheating usNo Baba,Telling LiesNo Baba,Open the balance sheetHA! HA! HA!
      B. RamalingaRaju
      Founder & Chairman, Satyam Computers Ltd.
      Thank You !
    • 49. Thank You !