Download here the statement of
Satyam Computer Services's Chairman Ramalinga Raju
** courtsey: The Hindu
Satyam Computer Services's Chairman Ramalinga Raju
** courtsey: The Hindu
Raju confessed that Satyam's balance sheet of 30 September 2008 contained:
* inflated figures for cash and bank balances of INR 5,040 crore (as against INR 5,361 crore reflected in the books).
* an accrued interest of INR 376 crore which was non-existent.
* an understated liability of INR 1,230 crore on account of funds was arranged by himself.
* an overstated debtors' position of INR 490 crore (as against INR 2,651 crore in the books).
Raju claimed in the same letter that neither he nor the managing director had benefited financially from the inflated revenues. He claimed that none of the board members had any knowledge of the situation in which the company was placed.
He stated that
"What started as a marginal gap between actual operating profit and the one reflected in the books of accounts continued to grow over the years. It has attained unmanageable proportions as the size of company operations grew significantly (annualised revenue run rate of Rs 11,276 crore in the September quarter of 2008 and official reserves of Rs 8,392 crore). As the promoters held a small percentage of equity, the concern was that poor performance would result in a takeover, thereby exposing the gap. The aborted Maytas acquisition deal was the last attempt to fill the fictitious assets with real ones. It was like riding a tiger, not knowing how to get off without being eaten.”
Satyam logo
Aftermath:
Raju had appointed a task force to address the Maytas situation in the last few days before revealing the news of the accounting fraud. After the scandal broke, the then-board members elected Ram Mynampati to be Satyam's interim CEO. Mynampati's statement on Satyam's website said:
"We are obviously shocked by the contents of the letter. The senior leaders of Satyam stand united in their commitment to customers, associates, suppliers and all shareholders. We have gathered together at Hyderabad to strategize the way forward in light of this startling revelation."
On 10 January 2009, the Company Law Board decided to bar the current board of Satyam from functioning and appoint 10 nominal directors. "The current board has failed to do what they are supposed to do. The credibility of the IT industry should not be allowed to suffer." said Corporate Affairs Minister Prem Chand Gupta. Chartered accountants regulator ICAI issued show-cause notice to Satyam's auditor PricewaterhouseCoopers (PwC) on the accounts fudging. "We have asked PwC to reply within 21 days," ICAI President Ved Jain said.
On the same day, the Crime Investigation Department (CID) team picked up Vadlamani Srinivas, Satyam's then-CFO, for questioning. He was arrested later and kept in judicial custody.
On 11 January 2009, the government nominated noted banker Deepak Parekh, former NASSCOM chief Kiran Karnik and former SEBI member C Achuthan to Satyam's board.
Immediately following the news, Merrill Lynch (Now with Bank of America) terminated its engagement with the company.
Also, Credit Suisse suspended its coverage of Satyam.[citation needed]. It was also reported that Satyam's auditing firm PricewaterhouseCoopers will be scrutinized for complicity in this scandal.
SEBI, the stock market regulator, also said that, if found guilty, its license to work in India may be revoked.
Satyam was the 2008 winner of the coveted Golden Peacock Award for Corporate Governance under Risk Management and Compliance Issues, which was stripped from them in the aftermath of the scandal.
The New York Stock Exchange has halted trading in Satyam stock as of 7 January 2009.
India's National Stock Exchange has announced that it will remove Satyam from its S&P CNX Nifty 50-share index on January 12.
The founder of Satyam Ramalinga Raju was arrested two days after he admitted to falsifying the firm's accounts. Ramalinga Raju is charged with several offences, including criminal conspiracy, breach of trust, and forgery.
Ramalinga Raju
Satyam's shares fell to 11.50 rupees on 10 January 2009, their lowest level since March 1998, compared to a high of 544 rupees in 2008. In New York Stock Exchange Satyam shares peaked in 2008 at US$ 29.10; by March 2009 they were trading around US $1.80.
The Indian Government has stated that it may provide temporary direct or indirect liquidity support to the company. However, whether employment will continue at pre-crisis levels, particularly for new recruits, is questionable.
On 14 January 2009, Price Waterhouse, the Indian division of PricewaterhouseCoopers, announced that its reliance on potentially false information provided by the management of Satyam may have rendered its audit reports "inaccurate and unreliable".
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 non-existent employees.
On 5th February 2009, the six-member board appointed by the Government of India named A. S. Murthy as the new CEO of the firm with immediate effect. Murthy, an electrical engineer, has been with Satyam since January 1994 and was heading the Global Delivery Section before being appointed as CEO of the company. The two-day-long board meeting also appointed Homi Khusrokhan (formerly with Tata Chemicals) and Partho Datta, a Chartered Accountant as special advisors.
In March 2009 the company announced it would begin soliciting bids from potential buyers.
On April 13, 2009, Kiran Karnik, the MD at Satyam announced that IT services provider Tech Mahindra had offered the highest bid at Rs 58 per share.
Tech Mahindra logo
Tech Mahindra will have to pay a total of Rs 2890 crore for 51% stake in Satyam. and the IT company will have a market cap of Rs 5,666 crore on expanded equity. A US-based investment firm owned by billionaire Wilbur Ross and an Indian construction and IT services firm, Larsen and Toubro were the other bidders. Cognizant Technology Solutions had expressed its interest in a joint bid with Wilbur Ross but backed out at the end.
Anand Mahindra, Chairperson Mahindra group
Satyam Computer Services Ltd was founded in 1987 by B.Ramalinga Raju. Satyam's network covers 67 countries across six continents. The company employs IT professionals across development centers in India, the United States, the United Kingdom, the United Arab Emirates, Canada, Hungary, Singapore, Malaysia, China, Japan, Egypt and Australia. It serves over 654 global companies, 185 of which are Fortune 500 corporations. Satyam has strategic technology and marketing alliances with over 50 companies. Apart from Hyderabad, it has development centers in India at Bangalore, Chennai, Pune, Mumbai, Nagpur, Delhi, Kolkata, Bhubaneswar, and Visakhapatnam.
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