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Raju Raju sat on the wall
Raju Raju had a great fall
Balance sheet diedShareholders cried
Raju Raju made a fraud
GUESS THIS POEM IS BELONGSTO ?
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In the broadest sense, a fraud is anintentional deception made for personal gainor to damage another individual; the related
adjective is fraudulent.
FRAUD
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THE SATYAMSCANDAL
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Set up in the year 1987 by B.Ramalinga Raju.
Indias 4th biggest software company.
On 26th August, 1991 it was converted into a
Public Limited Company and went for PUBLICISSUE in 1992.
BSE IPO oversubscribed 17 times when madepublic.
SATYAM
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Satyam faced is the biggest fraud in India'scorporate history.
The company management, mainly disgraced
chairman B Ramalinga Raju, kept everyone in thedark for a decade.
The Fraud
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Why on 7th Jan 2009?
DSP Merrill Lynch informed SEBI about
Material irregularities in Accounts on 6th Jan
Minutes of Meeting of 16th December,2008were not submitted to RoC-(This createdsome doubts)
Hearing of Upaid- satyam case on 8th Jan atthe US court
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On 7 January 2009, companys previous ChairmanRamalinga Raju resigned after notifying boardmembers and the Securities and Exchange Board ofIndia (SEBI) that Satyam's accounts had beenfalsified.
1. Inflated figures for cash and bank balances ofRs 5,040 crores as against Rs 5,361 crore reflected in
the books.
2.An accrued interest of Rs. 376 crore which was non-existent.
3. An understated liability of Rs. 1,230 crore onaccount of funds was arranged by himself.
4. An overstated debtors' position of Rs. 490 crore (as
against Rs. 2,651 crore in the books.
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ACTUAL CASH IN
BANK WAS 321CRORES,
INFLATED 5040CR.
NO ACCRUEDINTEREST 376.34
CR.
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UNDERSTATEDLIABILITY 1230Cr. Which wasARRANGED BYMR.RAJU
5,040 + 376 +490 (Rs. Cr)
Rs. 1,230 Cr Rs. 7,136Cr
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Who foundIrregularities
Investment banker DSPMerrill Lynch was appointedby Satyam to look for apartner or buyer for thecompany.
DSP Merrill terminated itsengagement with thecompany soon after it foundfinancial irregularities.
Merrill Lynch also sent theinformation and the reasonfor their termination of thecontract to the Bombay
Stock Exchange, SEBI andeven the New York Stock
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The guilty
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The promoters
Since the promoters, in thiscase, held only about 8percent shares, their ideato push through the Maytasacquisition deal wasdefeated by an angry lot ofshareholders.
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Directors and independentdirectors
The Satyam board, including itsfive independent directors hadapproved the founder's proposal tobuy 51 per cent stake in Maytas
Infrastructure and all of MaytasProperties, owned by the familymembers of Satyam chairman BRamalinga Raju.
Despite the shareholders not beingtaken into confidence, the
directors went ahead with themanagement's decision. The decision of acquisition was,
however, reversed 12 hours laterafter investors dumped Satyam'sstock and threatened action
against the management.
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The government
The government too isequally guilty in not havingmanaged to save theshareholders, theemployees and someclients of the companyfrom losing heavily.
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Stakeholders Model
SATYAM
Shareholders
Directors
Customers
Employees
Competitors
Public
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Employees
It is nights and heartburns for the over53,000 employees of SatyamComputers as they conjure up worstcase scenarios like non-payment ofsalaries, project cancellations , layoffs
and equally bleak prospects outside.As the company's management tries to
reassure shocked employees, jobssites have got flooded from resumes ofhundreds of Satyam employees.
Job consultants believed that in the
current economic climate , Satyamemployees might have to settle forlower salaries outside.
It is an employers' market.
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Shareholders
An accounting fraud was the lastthing investors in India wouldhave imagined as a trigger for areversal in investor sentiment.
This scam is likely to affect theimage of Indian companiesamong foreign portfolio investors.
The share prices of Satyam saw asharp fall after Rajus confession.
The share prices fell down from190 to 30 (approximately) in amatter of a day.
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Clients
Satyam Computers clientsinclude General Electric,Nissan Motors and GeneralMotors.
The debacle(sudden downfall)
may force the clients to reviewtheir contracts and look atother offshore suppliers.
Australian telecom companyTelstra, had already decided to
split a new contract worth $200million among three Indianvendors.
Another partner and customer ofthe company, Cisco Systems
said that a proposedinvestment in Sat am Global
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Public
The incident has hurtpublic perception of
Corporate India and islikely to hurt
shareholders'confidence in India Inc.
It resulted inincalculable and
unjustifiable damage toBrand India and Brand
IT in particular.
It is likely to dent the
public credibility aboutthe concepts of
corporate governance inIndia
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Competitors
The competitorswere mainly
benefited positivelyfrom this scam.
The Satyam Scam
was also lesson tolearn for the other
organisations in
the IT sector
Competitors
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Mahindra Satyam
Tech Mahindra paid Rs1757Crorefor a 31% stake in thecompany, at Rs 58 per share.
Satyam Computer Serviceszoomed 15% to Rs 54.20ahead of theannouncement of the highest
bidder for the company on April13, 2009.
In India this moment was full ofpraise for the manner andspeed with which the
reconstituted board of Satyam
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New policies 1.1 Compliance with Laws, Rules and
Regulations.
2.1 Legal, Honest and Ethical Conduct.
2.4 Suspected Fraudulent behavior.
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What HasIndia learnt?
Audit committees are being more careful toensure that the external auditors perform theirrole more diligently. We also find that the
chairman of the board and members of the auditcommittee are being more careful and thoroughin their questioning. Boards, too, are taking careto ensure that there are no slip-ups at their end.
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THANK YOU