CONFLICT

SATYAM

SATYAM

• BRIEF INTRODUCTION• HISTORY• RISE OF SATYAM• THE CONFLICT• SOURCES OF CONFLICT• THE THRESHOLD• EFFECTS OF CONFLICT• THE GUILTY• TYPE OF CONFLICT• THE HIDDEN TRUTH

TABLE OF CONTENTS SATYAM

• From stars to behind the bars.

• From `544 to `11.37.

• How Asia's 2nd largest IT company fell off.

• Conflicts was functional or dysfunctional?

CURTAINS TO BE RAISED SATYAM

From stars to behind the bars SATYAM

Category 1 Category 2 Category 3 Category 40

100

200

300

400

500

600544

11.37

From `544 to `11.37 SATYAM

OR

SATYAM

HERE

WE

GO…..

SATYAM

OOPS…

• Satyam Computer Services, presently Mahindra Satyam is an Indian IT services company based in Hyderabad, India.

• It was founded in 1987 by Ramalinga Raju.

• Satyam network covers 67 countries across.

• It served over 654 global companies.

• The company employs 53,000 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 .

INTRODUCTION SATYAM

• 1987 Incorporated as private limited company

• 1991 Debuts on the Bombay Stock Exchange (BSE) IPO oversubscribed by 17 times.• 1999

Assessed at SEI CMM® Level 5 Satyam Infoway (Sify) becomes the first Indian Internet company listed on NASDAQ Satyam forms joint venture with TRW Inc. Presence established in 30 countries .

• 2000 Associate count reaches 10,000 Satyam receives National HRD Award from Indian government Dataquest names Ramalinga Raju IT Man of the Year.

HISTORY SATYAM

• 2002 Satyam BPO launched in Hyderabad.

• 2006Revenue exceeds US$1 billion .

• 2007Becomes the Official IT Services Provider for the

FIFA World Cups, 2010 (South Africa) and 2014 (Brazil) .• 2008

Revenue crosses US $ 2-billion mark Adopts new tagline “Business Transformation. Together.”

SATYAM

CONFLICT WITH UPAID

• UPAID was an England based company and was working with SATYAM since 1997.• 2002

UPAID complained about Satyam's quality of work. Satyam said it had not been paid, and that the IPRs reverted to it.

• 2007UPAID Systems filed a case of intellectual fraud and forgery against Satyam.

• TYPE OF CONFLICTThis was an INTER GROUP conflict that is conflict between two groups. Here conflicting parties were SATYAM and UPAID.• SOURCE OF CONFLICTHere source of conflict was the INFORMAL AGREEMENT that leads SATYAM to England court.• RESULTThe court eventually refused the injunction and held that the Settlement Agreement did not deprive Upaid of future rights to sue for breach of Assignment or for alleged fraud in relation to that Agreement. So SATYAM has to pay back the amount to UPAID.• EFFECT OF CONFLICTThis conflict was proved to be DYSFUNCTIONAL for SATYAM as they had to return to Texas.

SATYAM

CONFLICT WITH WORLD BANK

Forensic experts and bank investigators of World Bank discovered that spy software was covertly installed on workstations inside the bank's Washington headquarters, allegedly by one or more contractors from Satyam Computer Services.

TYPE OF CONFLICTIt was again an inter group conflict as it was between two parties that is SATYAM

and WORLD BANK.

SOURCE OF CONFLICTHere in this case the spy software installed by one of the contractor of SATYAM at

work station of WORLD BANK proved to be the only source of conflict.

RESULTIn February 2008, the World Bank temporarily suspended Satyam from bidding on

new contracts, and then in September formally made the firm ineligible to bid on future contracts.

EFFECT OF CONFLICTOnce again the conflict proved to be DYSFUNCTIONAL for SATYAM

COMPUTER SERVICE LTD as results were not in their favor.

SATYAM

FOR $1.6 BILLIONS

MAYTASPROPERTIES

MAYTAS INFRA

2008The company attempted to acquire two infrastructure companies.

CONFLICT WITH SHAREHOLDERS S

ATYAM

• This eventually led to a review of the deal by the government, a veiled criticism by the vice president of India and Satyam’s clients re-evaluating their relationship with the company.

• Satyam’s investors lost about INR 3,400 crore in the related panic selling.

TYPE OF CONFLICTThis was an INTRAGROUP conflict, as it happened between the shareholders and the directors of the company.

SOURCE OF CONFLICTHere source of conflict was the decision taken by the directors which was not supported by the shareholders.

SATYAM

• When Raju announced the company would spend $1.6 billion to buy Maytas only to reverse the decision a few hours later under shareholder pressure.

• Satyam ADRs lost 50% of their value overnight.• Satyam’s shares fell 55% on the New York Stock Exchange . • Three members of the board of directors resigned on 29th Dec

2008.

RESULT SATYAM

DYSFUNCTIONAL

• Once again the conflict was proved to be DYSFUNCTIONAL for the company due to the negative results mentioned in previous slide.

EFFECT OF CONFLICT SATYAM

• December 29, 2008:Resignation of directors starts…

Prof. Krishna G Palepu, Non-Executive Director and Mr. Vinod K Dham, Non-Executive & Independent Director resign from the board.

• Jan 7, 2009: Satyam receives letter from chairman

tendering resignation.

• He notified board members and the Securities and Exchange Board of India (SEBI) that Satyam's accounts had been falsified.

THE INSIDE STORY SATYAM

RESIGNATION LETTER SATYAM

ARTIFICIALLY ADDED 588 OPERATING PROFIT .INCREASING THE CASH RESERVE ONLY FOR Q2 ALONE TO 588

UNDERSTATED LIABILITY 1230 Cr. Which was ARRANGED BY

MR.RAJU

LIABILITIES

NO ACCRUED INTEREST 376.34

CR.

ACTUAL CASH IN BANK WAS

5000 INFLATED 312 CR.

ACTUAL DEBT WAS 2161OVERSTATED 490 CR.

CURRRENT ASSETS

DESCRIPTION OF FALSIFICATIONS SATYAM

EFFECTS• This has resulted in artificial cash and bank balances going up by

Rs 588 crore in Q2 alone • The gap in the balance sheet has arisen purely on account of

inflated profits over a period of last several years (limited only to Satyam standalone, books of subsidiaries reflecting true performance).

• What started as a marginal gap between actual opera ting 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 (annualized revenue run rate of Rs 11,276 crore in the September quarter, 2008 and official reserves of Rs 8,392 crore).

• He said “it was like riding a Tiger, not knowing how to get off “

SATYAM

ANOTHER LIE

•Raju accepted that 12000 out of 53000 of his employees were fake and never existed.

SATYAM

JOIN THE DOTS SATYAM

WHAT HAPPENNED NEXT????

• Immediate Market Reaction:Sensex stock index dropped 7.3%.• The New York Stock Exchange has halted trading in

Satyam stock. • India’s National Stock Exchange has announced that it will

remove Satyam from its CNX Nifty 50-share index on January 12 Satyam’s shares fell to 11.37 rupees on 10 January 2009 , their lowest level since March 1998 . Last year they hit a high of 544 rupees.

SATYAM

WHAT HAPPENED TO RAJU???• Raju and his brother, B Rama Raju, were then arrested by the CID

Andhra Pradesh police headed by Mr. V S K Kaumudi, IPS on charges of breach of trust, conspiracy, cheating, falsification of records.

• Raju was hospitalized in September 2009 following a minor heart attack and underwent angioplasty.

• Raju was granted bail on condition that he should report to the local police station once a day and that he shouldn't attempt to tamper with the current evidence.

• This bail was revoked on 26 October 2010 by the Supreme Court of India and he has been ordered to surrender by 8 November 2010.

• The people of his native village, Garagaparru, hail the development works undertaken by the Byrraju Foundation, the charitable arm of Satyam.

• Ramalinga Raju was Granted a bail by the supreme court on 4th november 2011 after the Central Bureau of investigation failed to chargesheet Raju within the statutory period.

SATYAM

AND FINALLY……• SATYAM got its new identity as MAHINDRA SATYAM after been

over taken by TECH MAHINDRA.

SATYAMSATYAM MAHINDRA

SATYAM

OR

THE SAME QUESTION. SATYAM

SATYAM

FUNCTIONAL*

*FOR RAMALINGA RAJU

CONFLICT WAS

REFERENCES

• www.theregister.co.uk/2008/12/.../world_bank_bans_satyam• www.informationweek.com/news/global-cio/interviews• www.business-standard.com › Home › Companies & Industry• www.businessweek.com/globalbiz/content/.../

gb20081229_267676.h• http://spicyipindia.blogspot.in/2008/01/satyam-evam-upaid-

who-paid.html• http://en.wikipedia.org/wiki/Byrraju_Ramalinga_Raju

SATYAM

PRESENTED BY

• NAVJOT SINGH (A-26)• HARKIRAT SINGH (A-24)• PARAM CHEEMA (A-27)• MANPREET SINGH (A-20)• VARUN (A-37)

SATYAM

THANKS

RABRAKHAA

GOD BLESS YOU ……