SRMU

1. A Study on the CG Issues at Satyam
Computers Consultancy LTD.
Presented By:
Deepanshu Joshi (39)
Arvind Pandey (60)
Rahul Kumar Singh (33)
Mhd. Iltija Hussain (48)

3. People Behind The Scam
 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

4. Points To Consider
• Raju and his brother, B Rama Raju, were arrested by
the Andhra Pradesh police on charges of breach of
trust, conspiracy, cheating, falsification of
records.
• Raju has mislead various investors.
• Raju had also used dummy accounts to trade in
Satyam's shares.
• He has violated the insider trading norm.
• On 22 January 2009, CID told in court that the actual
number of employees is only 40,000 and not 53,000 as
reported earlier and that Mr. Raju had been allegedly
withdrawing INR 20 crore rupees every month for
paying these 13,000 nonexistent employees.

5. Points To Consider…
• Raju wanted to take over his MAYTAS INFRA and
MAYTAS PROPERTIES(company of his sons).
• He was blamed that he was using the funds of the
investors for the family business.
• Satyam Computers had on December 16,2008,
announced that it will acquire two group firms
Maytas properties & Maytas Infra
• The Board Of Directors of Satyam had approved
the founder’s proposal to buy 51 per cent stake in
Maytas Infrastructure and 100 % in Maytas
Properties

6. Points To Consider….
• The total outflow for both the acquisitions was
expected to be US$ 1.6 bn comprising of US$ 1.3
bn for the 100% stake in Maytas Properties and
US$ 0.3 bn for the 51% stake in Maytas Infra.
• This is the move that sparked a row over alleged
violation of corporate governance laws.
• This deal is not profitable for investors, so after
this announcement they started to raise their
voices against the deal

7. Points To Consider….
• Its financial statements for years were totally false,
cooked up
• The Balance sheet as of September 30, 2008 showed-
Inflated (non-existent) cash and bank balances of Rs.
5040 crore (as against Rs. 5312 crore reflected in the
books)
• An accrued interest of Rs. 376 crore which is non-
existent.
• An understated liability of Rs.1230 crore on account of
funds arranged by BR RAJU.
• The Debtors were overstated by 400 millions plus.

9. Fudging Numbers……
In early January 2009, Raju revealed that the revenue and
profit figures of Satyam had been inflated for past several
years. The following were the inflated figures:
• Inflated cash and bank balance Rs.5040cr
• Non existent accrued interest Rs376cr
• Understated liability of Rs.1230cr
• Overstated Debtor position of Rs.490cr
• Inflated staff by 12000 ( Actual were 40000)
• Revenue of Rs.2700cr (Actual were Rs.2112cr)
• Operating margin to be 6494 cr ( Actual were 61cr)

10. Flaws In Corporate Governance
Corporate governance includes various parties:
1)Shareholders
2)Employees
3)Management
4)Bankers
5)Government

11. Flaws In Corporate Governance….
SMALL HOLDINGS TO THE PROMOTERS:
• Promoters held a small portion of equity.
• Created an image of charismatic leaders by showing
falsified success.
• Had unquestionable control over the company.
FAILURE OF THE BOD:
• Failed the prime duty of oversight
• Board of directors composed mainly of independent
directors yet failed to notice the scam cooking in the
company
• Ignorance didn’t lead to bliss in their case

12. Flaws In Corporate Governance….
FAILURE OF AUDIT COMMITTEE:
• Failed to act on a whistle blower’s expose.
• The mail by an alias exposing the scam was forwarded to the
auditors
• The auditor accused the contents of the mail to be false and
assured of a detail reply on 29th Dec, however the meeting never
took place.
DISCLOSURE OF THE PLEDGING PROMOTER’S SHARE:
• Mr. Raju had pledged mist of his promoter’s shares to borrow
funds.
• Mr. Raju’s share declined from 8.74% in 2008 to 3.6% in 2009
• The shareholders had no clue of the decline in the stake of the
promoters.

13. Flaws In Corporate Governance….
• Governance issue at Satyam arose because of non fulfillment of
obligation of the company towards the various stakeholders. It
proved a poor relationship with all the stakeholders.
• It is well known that a shareholder has a right to get information
from the organization, such information could be with respect to
the merger and acquisition.
• Shareholders expect transparent dealing in an organization. They
even have right to get the financial reporting and records.
• In the case of satyam, the above obligations were never fulfilled.
The acquisition of maytas infrastructure and properties were
announced without the consent of shareholders.
• They were even provided with false inflated financial reports.
• The shareholders were cheated

14. Flaws In Corporate Governance….
• Employees were shown with a inflated figure.
• The excess of employees in the organization were kept
under VIRTUAL POOL who received just 60% of their
salaries and several were removed.
• The entire scam had its impact on management.
• Questions were raised over the credibility of management.
• Any organization has its obligation towards the
Government by means of timely payment of taxes and
abiding by the rules and laws framed up by the
Government. As per the case with satyam , the company
did not pay advance tax for the financial year 2009. As per
the rule, the advance taxis to be paid 4 times a year; such
was not fulfilled by them.

15.  IPC SECTION 120B
•For criminal conspiracy
 IPC SECTION 409
•Criminal breach of trust
 IPC SECTION 420
•Cheating
 IPC SECTION 468
•Forgery
 IPC SECTION 471
•Falsification of records
 SEBI INSIDER TRADING NORMS