gr5 satyameva-jayate final

8/7/2019 Gr5 Satyameva-Jayate FINAL

1/34

A C A S E S T U D Y A N A L Y S I SB Y

G R O U P 5

Satyameva JayateTruth Shall Prevail


2/34

Agenda for Discussion

y Satyam ABrief History of the Indian IT Giant

y Ramalinga Raju Introduction about the IT czar

y The Untamed Tiger What was going wrong

y The Tiger got Unleashed Satyam Fiasco

y The White Collared Thieves Parties Involved

y The Ripple Effect Impacted Parties

y Rise n Shine How things were put in placey Lessons Learnt - Conclusion

3/25/2011

2

Business Ethics


3/34

Satyam ABrief History of theIndian IT Giant

3/25/2011

3

Business Ethics


4/34

y Moving away from traditional agriculture businessset up a spinning and weaving mill.

y R.Raju shifted to real estate business- Satyamconstructions.

y 1987-

Founded Satyam Computer Services with brother-in -law DVSRaju.

Incorporated as private ltd company

y 1991-

Offshore software project with John Deere & Co.(Satyam 1stFortune 500 cust.) announced

Recognized as public listed company; debuts on BSE


5/34

y 1993

Satyam signs JV with Dun & Bradstreet for IT services

Awarded ISO 9001 certification

Satyam technology centre(STC) inaugurated JV with GE announced

y 1999

Satyam Infoway (Sify) becomes 1st Indian Internet company

listed on NASDAQ Presence established in 30 countries

y 2000 Recieves National HRD award from GOI

Dataquest names R.Raju as ITMan of the Year


6/34

y 2001

Listed on NYSE

y 2002

BPO launched in Hyderabad

y 2006 Sets 1st global innovation hub Singapore.

Sets operations in China

y 2007 R.Raju , named Ernst & Young entrepreneur of the year

Opens development centre-Malaysia, Vizag(India)


7/34

Disastrous Year

y 2008 Adopts new tagline Business Transformation together

Innovation award for Partner Excellence by software AG

y Dec 16,2008 Satyam board of directors approved proposal to acquire 100%

stake inMaytas properties & 51% inMaytas Infra

y Dec17-

Maytas Deal cancelled

y Dec 29- Resignation of Directors Start

y Jan 7,2009- Letter from Chairman tenderingresignation & financial irregularities


8/34

Ramalinga Raju Introductionabout the IT czar

3/25/2011

8

Business Ethics


9/34

Ramalinga Raju

Born-1954

Role model for efficient managemententrepreneurship, Leadership

Qualification and awards Jesuit School

MBA-Ohio University US

Ernst and Young Entrepreneur of the Year in 2007

Young Indians looked at him as their role model


10/34

The Untamed Tiger What wasgoing wrong

3/25/2011

10

Business Ethics


11/34

Cooking books : inflated profits and revenues

Nepotism : close the gap- merging the two firms

Omission of duty : management failed to see what isgoing wrong

Irresponsible directors

Nelsons eye : sebi was not informed about any fraudmoves of the company


12/34

Continued

Promoters selling shares before the fall : sharesfallen from 26.1% to 3.6%- profit made over rs 1000crore.

Institutional investors

Political establishment : some connection with thepolitical establishments


13/34

The Tiger got Unleashed Satyam Fiasco

3/25/2011

13

Business Ethics


14/34


15/34

The Scam

y On 7 January 2009, companys previous Chairman Ramalinga Raju

resigned after notifying board members and the Securities and

Exchange Board of India (SEBI) that Satyam's accounts had been

falsified.

Raju confessed that Satyam's balance sheet of 30 September 2008

contained:

1. Inflated figures for cash and bank balances of Rs 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 on account of funds

was arranged by himself.

4. An overstated debtors' position of Rs. 490 crore (as against

Rs. 2,651 crore in the books.


16/34

ACTUAL

DEBT WAS

2161.

OVERSTATED490 CRORES.

ACTUAL CASH

IN BANK WAS

321 CRORES,

INFLATED

5040 CR.

NO ACCRUED

INTEREST

376.34 CR.


17/34

UNDERSTATED

LIABILITY

1230 Cr.

Which was

ARRANGED BY

MR.RAJU

5,040 + 376

+ 490 (Rs.

Cr)

Rs. 1,230

Cr

Rs.7,136

Cr


18/34

The White Collared Thieves Parties Involved

3/25/2011

18

Business Ethics


19/34

The Promoters

y Since the promoters, inthis case, held only about8 percent shares, their

idea to push through theMaytas acquisition dealwas defeated by an angrylot of shareholders.

3/25/2011

19

Business Ethics

61.5710.42

19.4

8.61

Share of Investors

Institutions

Non Institutions

ADRs

Promoters


20/34

Directors and Independent Directors

y The Satyam board, including its fiveindependent directors had approvedthe founder's proposal to buy 51 percent stake inMaytas Infrastructure

and all ofMaytas Properties, ownedby the family members of Satyamchairman B Ramalinga Raju.

y Despite the shareholders not beingtaken into confidence, the directorswent ahead with the management'sdecision.

y The decision of acquisitionwas, however, reversed 12 hours laterafter investors dumped Satyam'sstock and threatened action againstthe management.

3/25/2011

20

Business Ethics


21/34

Other company bigwigs

y Satyam's CFO SrinivasVadlamani has already

been arrested.y But could only two or three

people have managed tocook the books for years of

a company so large? Highlyunlikely.

3/25/2011

21

Business Ethics


22/34

Satyams auditors

y PwC has written a letter to the BOD of Satyamthat its audit may be rendered "inaccurate andunreliable" due to the disclosures made by

Satyam's (ex) Chairman..

3/25/2011

22

Business Ethics


23/34

The Bankers

y If the auditors wereconned, it means that

either the bank statementand certificates wereforged

y Satyam's banks -- ICICI

Bank, HDFC Bank, Bankof Baroda, etc

3/25/2011

23

Business Ethics

FI's who suffered loss at Satyam

Name Share (in Crores)

Aberdeeen Asset Managers Ltd 3.44

Fidelity 2.3

ICICI Prudential Life Insurance 1.66

Lazard Asset Management 1.45

LIC 1

Others Less than 1 Cr


24/34

The SEBI

y The SEBI had given aclean chit to Satyam inthe probe on violation of

corporate governancelaw.

3/25/2011

24

Business Ethics


25/34

Investment Bankers

y Investment banker DSPMerrillLynch was appointed by Satyam tolook for a partner or buyer for thecompany.

y DSPMerrill terminated its

engagement with the company soonafter it found financialirregularities.

y Merrill Lynch also sent theinformation and the reason for theirtermination of the contract to theBombay Stock Exchange, SEBI andeven the New York Stock Exchange.

y However, despite the fact that DSPMerrill Lynch blew the whistle, it isnot yet clear why it took such a longtime to inform the authorities, andwhy it did not let the public know ofSatyam's misdeeds.

3/25/2011

25

Business Ethics


26/34

The Government

y The government too isequallyguilty in nothaving managed to save

the shareholders, theemployees and someclients of the companyfrom losing heavily.

3/25/2011

26

Business Ethics


27/34

The Ripple Effect ImpactedParties

3/25/2011

27

Business Ethics


28/34

StakeholdersModel

SATYAM

Shareholders

Directors

Customers

Employees

Competitors

Public


29/34

y EMPLOYEES-It is nights and heartburns for the over 53,000 employees ofSatyam Computers as they conjure up worst case scenarios like non-payment ofsalaries, project cancellations , layoffs and equally bleak prospects outside.

y SHAREHOLDERS-The share prices of Satyam saw a sharp fall after Rajusconfession. The share prices fell down from 190 to 30 (approximately) in a

matter of a day.y CLIENTS- The debacle may force the clients to review their contracts and look

at other offshore suppliers

y PUBLIC-The incident has hurt public perception of Corporate India and islikely to hurt shareholders' confidence in India Inc.

y DIRECTORS- Satyam's CFO Srinivas Vadlamani and many others after thisscam, mainly due to their own mistakes of not actively participating in themanagement of the organisation had been arrested.

y COMPETITORS-The competitors were mainly benefited positively from thisscam.


30/34

O N 1 1 J A N U A R Y 2 0 0 9 , T H E G O V E R N M E N TN O M I N A T E D N O T E D B A N K E R D E E P A K

P A R E K H , F O R M E R N A S S C O M C H I E F K I R A NK A R N I K A N D F O R M E R S E B I M E M B E R C

A C H U T H A N T O S A T Y A M ' S B O A R D .

Rise n Shine How things wereput in place

NEW BOARD APPOINTED


31/34

y TechMahindra paid Rs1757 Crorefor a 31% stake in the company, at Rs 58 per share.

Satyam Computer Services zoomed 15% to Rs54.20 ahead of theannouncement of the highest bidder for thecompany on April 13, 2009.


32/34

Lessons Learnt - Conclusion

3/25/2011

32

Business Ethics


33/34

y Satyam was a wakeup call for India to clean up itsact. But did India Inc wake up? Experts and industrywatchers remain divided in the aftermath. While

there is a set of people who believe that Satyamdefinitely made promoters sit up and makealterations, there is an equally strong lobby that saysnothing has changed in the real sense of the term.

3/25/2011

33

Business Ethics


34/34

P R E S E N T E D B Y : -

G A U T A M G U L A T I ( 2 1 9 )K E Y O O R P R A S H A N T D I W A K E R ( 2 2 4 )

M E H A K A G G A R W A L ( 2 2 6 )M O N I C A V I R B H A N ( 2 2 7 )U P A S A N A S I N G H ( 2 6 5 )U R O O J A N S A R I ( 2 6 6 )

M O H I T M O T W A N I ( 2 7 0 )S H I V A N S H S H A R M A ( 2 7 5 )

Thank you

3/25/2011

34

Business Ethics

gr5 satyameva-jayate final

Documents