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Presentation1

  1. 1. SATYAM THE HIDDEN TRUTH
  2. 2. V.CHANDRA SEKARAN ( Pentamedia Group ) DINESH DALMIA (DSQ Softwares) RAMALINGA RAJU (Satyam Computers )
  3. 3. Byrraju Ramalinga Raju is the biggest fraudster. In the Indian software Industry. But he is not the first. Dinesh Dalmia, Vice-Chairman, DSQ software, has been in jail for Two years. Pentamedia company promoter V.Chandrasekaran was found to be in cahoots with tainted broker KETAN PAREKH in rigging up share prices.
  4. 4. THE TRUTH SERUM TRAILS <ul><li>Satyam’s Rs 7,000-crore duplicity. </li></ul><ul><li>Scale of monies and skullduggery involved and the worrying </li></ul><ul><li>implication for India’s IT sector. </li></ul><ul><li>The Satyam saga puts the entire corporate food chain into </li></ul><ul><li>question from directors and auditors to analysts and </li></ul><ul><li>the media. </li></ul><ul><li>Is The Satyam scandal just about a promoter manipulating </li></ul><ul><li>the financial statements of his company to show a </li></ul><ul><li>superior performance? </li></ul>
  5. 5. Satyam Fraud: More than accounting skullduggery Lawyers have already expressed doubts over whether the statement can actually Be deemed a confession and enough to implicate MR. Raju. Indeed, they say that it Is a very well drafted document designed to draw attention to the hole in the Finances without implicating himself anywhere for any act of commission.
  6. 6. Deflecting attention ?? <ul><li>Nowhere has he said that he was responsible for this nor </li></ul><ul><li>has he pointed his </li></ul><ul><li>finger at anyone else. Of course, as the chairman, </li></ul><ul><li>the buck stops with him but </li></ul><ul><li>that is not the same as saying ”I did it”. </li></ul><ul><li>He has tried to project himself as the saviour by pointing </li></ul><ul><li>out how he ”arranged” Rs 1,230 crore for the company. </li></ul><ul><li>The scored event that raised doubts is the carefully </li></ul><ul><li>orchestrated arrest of Mr Raju. </li></ul>
  7. 7. EVENT : <ul><li>The founder and Chairman of Satyam Computers Services, </li></ul><ul><li>the indian outsourcing company, confessed to fraudulently </li></ul><ul><li>inflating profits, overstating assets and suppressing </li></ul><ul><li>liabilities over several years. </li></ul><ul><li>DETAILS OF THE FRAUD </li></ul><ul><li>Bank balances, interest income and debtors were overstated </li></ul><ul><li>to the extent of Rs 50.4bn, Rs 3.76bn and Rs 4.9bn </li></ul><ul><li>respectively. Liabilities were understated by Rs 12.3bn. </li></ul><ul><li>The adjusted book value works out to Rs 18.4 per share </li></ul><ul><li>against a reported book value of Rs 124.3 per share and the </li></ul><ul><li>pre-fraud revelation stock market price of Rs 178.953 </li></ul><ul><li>per share. </li></ul>
  8. 8. <ul><li>Impact on India’s IT (outsourcing) industry </li></ul><ul><li>The Satyam scandal will undoubtedly mar India’s </li></ul><ul><li>reputation as a reliable provider of IT services to some </li></ul><ul><li>extent. </li></ul><ul><li>It is highly likely that other Indian outsourcing companies </li></ul><ul><li>will be subject to greater degree of scurtiny by regulators, </li></ul><ul><li>investors and customers. </li></ul><ul><li>Impact on stock market </li></ul><ul><li>News of what is possibly the country’s biggest corporate </li></ul><ul><li>fraud, sent the indices tumbling.. </li></ul><ul><li>Companies perceived to have poor corporate governance </li></ul><ul><li>standards were most affected. </li></ul>
  9. 10. The Man Who forced Raju’s Hand JUST WHY DID CHAIRMAN RAMALINGA RAJU TAKE THE outrageous decision of Emptying Satyam Computer Services ’ coffers Into his family’s pockets?? Simon Joyce , the CEO of london-based mobile payments technology firm upaid, May be that compelling reason. Upaid and satyam are battling each other on three legal fronts. Two suits, in which Satyam faces accusations of Fraud, breach of contract And forgery, have been in texas state and federal courts since 2007. Upaid is expected to file a ‘damages report’ that will enumerate the exact Numbers in Feb 2009, even as satyam is all set to go to trial in june next year. The outcome of the case may well establish some logic behind Raju’s bizzare move.
  10. 11. Satyam Calls Off The Deals Investors Felt Betrayed Public relations FAILED ACQUISITION ATTEMPT Maytas Properties and Maytas Infrastructure
  11. 12. SATYAM SCAM
  12. 13. GROWTH OVER MORALS <ul><li>Satyam-and one suspects many other companies- </li></ul><ul><li>started chasing growth at the expense of Morals. </li></ul><ul><li>Books were cooked. Raju described it best in his </li></ul><ul><li>confession to the board: “it was like riding a tiger, </li></ul><ul><li>knowing how to get off without being eaten.” </li></ul><ul><li>WHY SOFTWARE COMPANIES FAIL… </li></ul><ul><li>Entrepreneur- promoters in software services </li></ul><ul><li>have failed to rise above self-interest and build </li></ul><ul><li>sustainable businesses. </li></ul><ul><li>“ Often such companies are limited to the vision of </li></ul><ul><li>one person. It, therefore, becomes tough for them to </li></ul><ul><li>retain top grade managerial talent. That’s why a$200 </li></ul><ul><li>million company often doesn’t get $1billion.” </li></ul>
  13. 14. <ul><li>Their attitude was: if I make $10, I will put $7 in the </li></ul><ul><li>business and $3 in my pocket.” </li></ul><ul><li>Raju and the board mismanaged the $1.6 billion </li></ul><ul><li>investment decision process, even though it was </li></ul><ul><li>rolled back. </li></ul><ul><li>Even if infrastructure was to be the next hot, </li></ul><ul><li>growth area for SATYAM, how did it arrive at </li></ul><ul><li>Maytas Infrastructure as the Investment vehicle. </li></ul>
  14. 15. <ul><li>IS IT AN ACT OF CONSCIENCE OR IS RAJU </li></ul><ul><li>Just securing his son’s future? </li></ul><ul><li>A person who has been an idol has let down most who </li></ul><ul><li>Idolized him. </li></ul><ul><li>The most obvious of questions has still not been </li></ul><ul><li>answered. Is it so easy to show Rs 5,000 crore of non- </li></ul><ul><li>existent bank balances in balance sheets? </li></ul><ul><li>why did the disclosure come at this stage?? </li></ul><ul><li>Who benefits from them?? </li></ul><ul><li>These disclosures have a direct and material benefits to </li></ul><ul><li>the family, including his sons who control Maytas and </li></ul><ul><li>Rama Raju, Satyam’s MD, among others.. </li></ul>
  15. 16. <ul><li>There are many other questions that need </li></ul><ul><li>Answers : </li></ul><ul><li>Should we believe that the bank balances never existed? </li></ul><ul><li>Independent director M.Rammohan Rao, the dean of ISB, </li></ul><ul><li>chairs Satyam’s audit committee. How can he feign </li></ul><ul><li>ignorance and get” stunned by the disclosures”?? </li></ul><ul><li>Who valued the Maytas Properties’ land bank?? </li></ul><ul><li>With the benefits of hindsight, isn’t it true that the botched </li></ul><ul><li>acquisition attempt of Matyas Infra would have benefited </li></ul><ul><li>Satyam Shareholder’s?? </li></ul>
  16. 17. <ul><li>THE RUBBER STAMP CULTURE MUST BE </li></ul><ul><li>ERASED.. </li></ul><ul><li>WHY MALPRACTICES HAPPEN?? </li></ul><ul><li>Audit firms now have ‘limited liabilities’ as </li></ul><ul><li>opposed to ‘unlimited liabilities’. </li></ul><ul><li>Financial statements and disclosure are not as </li></ul><ul><li>credible as they used to be. </li></ul><ul><li>Corporate crimes are still carried out at less </li></ul><ul><li>severe level. </li></ul>
  17. 18. <ul><li>NOW WHAT </li></ul><ul><li>THERE ARE MORE QUESTIONS than answers in the wake </li></ul><ul><li>of RAMALINGA RAJU’S shocking confession: </li></ul><ul><li>Did Satyam really have the Rs5,000 crore cash </li></ul><ul><li>Reserve or did it not?? </li></ul><ul><li>Raju may prove to be a liar even in his guilt. Contrary to </li></ul><ul><li>his claim that he inflated accounts and the cash reserve </li></ul><ul><li>never existed, the government is investigating the </li></ul><ul><li>possibility that the money was there and was siphoned off. </li></ul><ul><li>And how much cash does Satyam urgently </li></ul><ul><li>need? </li></ul><ul><li>It has to pay creditors, including health insurance for </li></ul><ul><li>overseas employees and, of course, it has to pay salaries. </li></ul><ul><li>Just one month’s salary for company of Satyam’s size </li></ul><ul><li>would be $100-120 million. </li></ul>
  18. 19. <ul><li>Will Satyam’s customers stay or leave ?? </li></ul><ul><li>On jan 16, US-based state firm Insurance, one of </li></ul><ul><li>Satyam’s 649 clients, terminated it’s contract, estimated </li></ul><ul><li>$50 million. Inside Satyam, heads of verticals are calling </li></ul><ul><li>clients with offers to move to rival companies with their </li></ul><ul><li>full teams. </li></ul><ul><li>Will Satyam race more lawsuits? </li></ul><ul><li>Apart from the billion-dollar upaid lawsuit, Satyam </li></ul><ul><li>potentially faces an avalanche of class-action lawsuits </li></ul><ul><li>in the US. Almost a dozen US law firms have already filed </li></ul><ul><li>class-action law suits in US courts on behalf of investors. </li></ul>
  19. 20. <ul><li>Will there be large job losses? </li></ul><ul><li>YES . </li></ul><ul><li>the logic is simple. Going by Satyam’s headcount of53,000 </li></ul><ul><li>(which experts say would be harder to fudge given </li></ul><ul><li>provident fund payments), Satyam’s revenue per employee </li></ul><ul><li>is comparable to peers. For example, Satyam’s revenue </li></ul><ul><li>per employee for FY)* was about Rs. 15.5 lakh as compared </li></ul><ul><li>to infosys’ Rs 18.3 lakh and HCL Technologies’ Rs 15.04lakh. </li></ul><ul><li>What happens now to price Waterhouse? </li></ul><ul><li>if gross negligence’ or ‘connivance’ is established by the </li></ul><ul><li>ICAI panel, it could have large have greater consequences. </li></ul>
  20. 21. <ul><li>Corruption hits as hard as terror, as the </li></ul><ul><li>SATYAM scam shows : </li></ul><ul><li>If mumbai 26/11 threatened the physical wellbeing of Indian </li></ul><ul><li>citizens, the Satyam and scam threaten the economics well- </li></ul><ul><li>being of Indians. </li></ul><ul><li>look closely and you will find the same trail of corruption </li></ul><ul><li>behind both, with just one difference. </li></ul><ul><li>In Transparency International’s global ranking of corruption </li></ul><ul><li>last year, India ranked 85 th . </li></ul><ul><li>In India, the combined wealth pf the two Ambani brother’s </li></ul><ul><li>for example, had crossed the hundred-billion-dollar mark. </li></ul><ul><li>How come no financial journalist here investigates the </li></ul><ul><li>source of such wealth? </li></ul>
  21. 22. <ul><li>How come in these matters we fight shy of ideas </li></ul><ul><li>of transparency and accountability? </li></ul><ul><li>However, should not at least a minuscule section </li></ul><ul><li>of the media be giving us some basic details? </li></ul><ul><li>Does one have to be marxist to ask these </li></ul><ul><li>questions? Is a governmental bailout plan for the </li></ul><ul><li>rich and the greedy a “socialist” idea? </li></ul>In particulars , the pink press, which is supposed to be reporting from the financial ringside, seemed to have little clue that even as it was salivating at and being complicit in the successes of the wealth- makers, it was but a sniffing distance away from a Tsunami-size fraud
  22. 23. PRESENTED BY: PIY US H K HI L WANI HIMA NSHI A ROR A S HUB HI AGGA RWAL N EHA J AIN A KA NK SHA BAN SA L W E ARE N OT AMO NGST THE M….

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