Satyam scam


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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.
  • Satyam scam

    1. 1. SATYAM<br />SCAM<br />"SINKING SHIP OR TIP OF ICEBERG"<br />
    2. 2. Company Profile<br /><ul><li>Set up – 1987 to provide services in IT sector.
    3. 3. India’s 4th biggest software company.
    4. 4. Chairman and founder – B. RamalingaRaju.
    5. 5. On 26th August, 1991 it was converted into a Public Limited Company and went for PUBLIC ISSUE in 1992.</li></li></ul><li><ul><li>BSE IPO oversubscribed 17 times when made public.
    6. 6. It is listed in BSE, NSE, NYSE and Euronext (Amsterdam).
    7. 7. The company employs 53,000 IT professionals across development centers in 6 continents.
    8. 8. It serves over 654 global companies, 185 of which are Fortune 500 corporations.   </li></ul>Company Profile<br />
    9. 9. ACHIEVEMENTS<br /><ul><li>First IT Company in the World Certified under ISO9001:2000
    10. 10. Ranked Among India’s Top 10 Best Employers, 2004 and 2003
    11. 11. Top 13 Best-Managed Companies in India.
    12. 12. Corporate Citizen award for Corporate Social Responsibility.
    13. 13. SAP Pinnacle Award 2008.
    14. 14. Satyam Wins golden peacock award for excellence in Corporate Governance on Global level for 2ndtime.
    15. 15. United Kingdom Trade and Investment India Business Award for Corporate Social Responsibility</li></li></ul><li>Satyam Clients<br />A total of 650+ Clients <br />185 of the top fortune 500 Companies<br />
    16. 16. Satyam Board Structure<br />Other Independent Directors<br />B.RamaRaju<br />Promoter & CEO<br />B.RamalingaRaju<br />Promoter & Chairman<br />Ram Mynampati<br />Whole time Executive Director<br />SrinivasVadlamani Chief Financial Officer<br />Dr M. Srinivasan<br />Prof. Krishna G Palepu<br />Mr. Vinod K Dham<br />Mr. T R Prasad<br />Prof. V S Raju<br />Prof. M Rammohan Rao<br />ISB Dean/<br />Bharat electronics<br />Sasken Communication/<br />Hellsoft /Montalvo Systems and Newpath<br />GTB/Dr. Reddy’s Laboratories<br />Former CabinetSecretary /GMR Infra/ GVK Taj<br />
    17. 17. Satyam – Share holding Pattern<br />Institutional & Non-Institutional Shareholders<br />LIC 4.34%<br />L&T 4%<br />Lazard<br />Aberdeen 13.16%<br />Fidelity<br />ICICI Prudential<br />Citigroup<br />JP Morgan<br />Total Market capitalization was Rs. 15,262 Cr <br />(still Dec 16, 2008 )<br />
    18. 18. <ul><li> Announcement to acquire 2 group firms owned by Chairman RamalingaRaju's sons.
    19. 19. 51% stake in Maytas Infrastructure and 100 % in Maytas Properties.
    20. 20. US $ 1.3 billion - Maytas Properties and US$ 0.3 billion - Maytas Infra.
    21. 21. Total outflow for both the acquisitions was expected to be US$ 1.6 billion.</li></li></ul><li>So, How did it all begin?<br />
    22. 22.
    23. 23. Time-Line<br />16 Dec <br />2008<br />17 Dec <br />2008<br />26 Jan <br />2009<br />Satyam gets board approval for controlling stake in Maytas Infrastructure and Maytas properties as fully owned subsidiary for $1.6B (Rs. 8000 Cr.)<br />Satyam backs out of Maytas deal citing investors protest<br />Major Clients of Satyam express dissatisfaction.<br />Contracts worth $200 million up for grabs<br />Satyam shares plunge 55 percent in NYSE. BSE share plunges over 30% <br />Board meeting to be held on Dec 29 for proposed buyback of shares<br />
    24. 24. Time-Line<br />19 <br />Dec <br />23 Dec <br />206Jan <br />2009<br />20 <br />Dec <br />World Bank bans Satyam for 8 years due to inappropriate payments to staff and inability to provide information sought on invoices<br />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<br />Centre refers Satyam deal to Registrar of Companies (RoC)<br />
    25. 25. Time-Line<br />26 <br />Dec <br />28 <br />Dec <br />26 Jan <br />2009<br />29 <br />Dec <br />3 more Independent Directors resign. Mendu Rammohan Rao, Krishna G Palepu and Vinod K Dham<br />Board meet initially scheduled for 29th postponed to 10th January<br />1st independent director Dr. Mangalam Srinivasan resigns from Satyam board<br />Board announces exploring option for buyback of shares to restore investor confidence<br />Rumors in market about strategic takeover by IBM, Accenture <br />Satyam asks DSP to review board structure<br />Satyam objects to world bank statements, asks to apologies or face legal action<br />IL&FS sells 44.1 lakh shares pledged shares of Satyam promoters in 1 day. Promoters equity reduced from 8.6% to aprrox 7%<br />Promoters disclose that their entire holding in Satyam pledged with institutional lenders since 2006<br />
    26. 26. Time-Line<br />30 <br />Dec <br />02 <br />Jan <br />26 Jan <br />2009<br />03 <br />Jan <br />Satyam board confirms promoters stake to be around 5%. Further 3.2% still pledged.<br />Post cancellation of deal, Maytas looks for raising $500 million through sale of equities and properties<br />IL&FS sells further 44.27 Lakh pledged shares taking the tally to 1.5 crore pledged shares<br />Satyam-Upaid case hearing over the Maytas deal in Texas court on January 8.<br />
    27. 27. Time-Line<br />05 <br />Jan <br />06 <br />Jan <br />26 Jan <br />2009<br />Tech Mahindra (Revenues 3766 Cr.) offers to merge with Satyam (Revenues 8473 Cr.)<br />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<br />Promoters stake in the company down to 4.5%<br />The Night Before 7th Jan<br />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. <br />SEBI considers proposal to make it mandatory for promoters and majority share holders to disclosed pledged shares to stock exchange<br />
    28. 28. Time-Line<br />07 <br />Jan <br />26 Jan <br />2009<br />09:45 A.M. <br />Satyam Chairman Ramalinga Raju wrote letter to the company board<br />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. <br />ADR’s crash 90%<br />Satyam BSE scrip falls 78%<br />DSP snaps ties with satyam. <br />Ram Mynampati takes over as interim CEO according to Raju’s letter<br />Auditing firm PWC under scanner<br />Satyam stripped of Golden Peacock award<br />Govt. instructs RoC to review report<br />NSE removes Satyam from its benchmark index Nifty. <br />
    29. 29. Time-Line<br />08 <br />Jan <br />09<br />Jan <br />26 Jan <br />2009<br />10<br />Jan <br />BSE to replace Satyam Computer with Sun Pharmaceutical in its benchmark index Sensex with effect from January 12. <br />PwC in major trouble. Stocks of PwC clients take a major beating at the BSE and NSE<br />Former CFO ValdamaniSrinivas remanded to judicial custody <br />CFO ValdamaniSrinivas, who is the financial custodian of the company resigns<br />Raju brothers arrested by the police on charges of criminal conspiracy, cheating, forgery, misappropriation of funds and criminal breach of trust. <br />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.  <br />Market Capitalization of satyam falls to Rs. 1,607 Cr from Rs.15,262 Cr. on Dec 16 in 19 trading sessions.<br />
    30. 30. Time-Line<br />15<br />Jan <br />13 <br />Jan <br />14<br />Jan <br />16<br />Jan <br />26 Jan <br />2009<br />Government hands satyam case to SFIO<br />Maytas stocks hit the lower circuit for 7th consecutive trading session<br />23 year old employee of satyam commits suicide in Chennai<br />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<br />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<br />
    31. 31. STOCK CHARTING <br />
    32. 32. Fabricated Income Statements<br />‘Creative Account Practice’<br /><ul><li> Details of cash balances with Scheduled banks are not there in the</li></ul> Annual report<br />
    33. 33. UNDERSTATED LIABILITY 1230 Cr. Which was ARRANGED BY MR.RAJU<br />Understated Liabilities<br />Fraud Amount<br />Overstated cash balances, Income receivables<br />
    34. 34. SATYAM Meaning<br /> TRUTH.<br />Now, Satyam :-<br />A Rs. 7000 cr <br />LIE.<br />
    35. 35. <ul><li> Pressure to improve the company's performance.
    36. 36. Capture market.
    37. 37. Achieve billion dollar sales mark.
    38. 38. “It was like riding a tiger, not knowing how to get off without being eaten.”</li></li></ul><li>Impact of Scam<br />Share - Holders<br />Indian Economy<br />Stock Market<br />Stake - Holders<br />Employees<br />
    39. 39. Regulators investigating Satyam include<br />
    40. 40. Action Taken By Authorities<br />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. <br />The special committee will headed by ICAI Vice-President UttamPrakashAggarwal .<br />ICAI council members –<br /> S L Dogra, Amarjeet Chopra;<br />SubodhAggarwal ;<br />Akshay Gupta ;&<br /> K R Maheshwari, a banker and chartered accountant.<br />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. <br /><ul><li>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. 41. Raju was arrested on charges of cheating, fraud and and other criminal charges under various sections of Indian Penal Code (IPC).
    42. 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. 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.</li></li></ul><li>Liquidating assets and bringing in new investors.<br />DELOITTE and KPMG has been appointed as independent auditors to help restate the company’s financial reports.<br />Government superseded the board of Satyam and decided to appoint 10 nominee-directors.<br />DEEPAK PAREKH set to be appointed Chairman (Chairman of HDFC ltd and HDFC bank), KIRAN KARNIK and CACHUTAN (legal expert).<br />3 members of BCG has been appointed as a management advisor and is working to revive satyam.<br />TARUN DASS (CII Mentor), TN MANOHARAN (former president of ICAI) and SB MAINAK are among other 3 board members appointed by the Government.<br />Satyam board has appointed GOLDMAN SACHS & AVENDUS as its Investment Bankers.<br />SEBI and government of India devise appropriate fair and transparent measures for enabling open bids.<br />
    44. 44. Why Govt. Mediated<br />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.<br />Tosafeguard the Interest of small investors, So that faith can be restored in the market again.<br />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.<br />
    45. 45. Steps Taken After Satyam Fraud<br />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 <br />Appointment of Independent Auditors and Company Secretary by Company Law Board to conduct Audit of any private organization and time.<br />Set-up of 5 member Committee to suggest how to implement effective compliance and Corporate Governance in private sector by CLB. <br />
    46. 46. Finally Satyam acquired by tech mahindra….<br />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.<br />
    47. 47.
    48. 48. 32<br />RajuRaju sat on the wall,RajuRaju had a great fall,Balance sheet died,Shareholders cried,RajuRaju made a fraud.<br />RajuRajuYes Baba,Cheating usNo Baba,Telling LiesNo Baba,Open the balance sheetHA! HA! HA!<br />B. RamalingaRaju<br />Founder & Chairman, Satyam Computers Ltd.<br />Thank You !<br />
    49. 49. Thank You !<br />