The Satyam Scandal

THE RISE OF SATYAM

Satyam Computers was founded in 1987. It converted into Public Ltd Co. in 1992. The company offers consulting and

information technology services spanning various sectors.

Mahindra Satyam is overall ranked #153 by Fortune India 500 in 2011.

Satyam’s network covers 66 countries and 53000 employees across six continents. It is listed in BSE, NSE, NYSE

Company Profile

AWARDS ACHIEVED

Top-50 Marketers Award, under the Resurgent Marketers category for 2010 by Pitch India.

Mahindra Satyam BPO honored as “India’s Most Customer-Responsive BPO Company”AGC Networks, The Economic Times, Ernst & Young and Nielsen.

Ranked # 1 in the ASTD BEST Award American Society for Training and Development (ASTD).

And the list goes on….

What happened on January 7,2009??

THE DISASTROUS REVELATION

Accounting fraud of over 7800 crores rupees.

From past 7 years accounting books were cooked:

-Profits were inflated

-Understated liability and overstated debts.

-Accrued interest.

-The gap in the balance had risen due to inflated profits.

FABRICATED INCOME STATEMENTS

Stock Charting

THE LAST ATTEMPT

The MAYTAS Acquisition• Maytas infra and Maytas properties : firms

owned by the sons of Raju.

• Planned to buy the Maytas to fill the gap in the balance sheet.

• Last attempt Raju made to fill the gap in the balance sheet.

• Major shareholder rebellion

• Acquisition was termed “Poor corporate governance”.

CONFESSION LETTER

Raju wrote in the confession letter “Every attempt to fill the gap failed".

It was like riding a tiger, not knowing how to get off without being eaten”.

CONFESSION LETTER

Top officials were unawareOnly MD & CFO were others.

No personal profits.Did not sell any shares from 8 years.

• 11464 CroreCompanies

worth

• BSE sensex fell by 749.05 i.e. 7.25% .• NSE fell by 192.40 points i.e. 6.18%.

Stock Market

• Biggest single day fall for a stock in stock market

• 175 Rs/-(Jan 6th)

Satyam shares 1607 Crore

77%

All time low of Rs 11.50 on 9th jan and closed at 23.75 Rs/-.Compared to highest of 524.90 Rs/- on may 29,2008

Ramalinga Raju

B. RamaRaju

T Sriniv

as

S. Gopalkrishna

n

V. Sriniv

as ILLUSIONISTS

THE ILLUSIONISTS

•Ramalinga Raju: Satyam Former Chairman•B Rama Raju: Brother of Ramalinga Raju

Former Managing director .•V Srinivas: Ex-chief financial officer •S Gopalakrishnan: PriceWaterhouse Auditor•Talluri Srinivas: PriceWaterhouse Auditor

CURRENT STATUS

GOVT CONCERNED ABOUT SATYAM EMPLOYEES.

GOVT TO HELP CBI IN SATYAM SCAM CASE.

RAMALINGA RAJU SENT TO POLICE

CUSTODY TILL 22 ND JANUARY.

CBI INVESTIGATING FURTHER.

Ramalingam Raju along with 2 other accused of the scandal, had been granted bail from Supreme court on 4 November 2011 as the investigation agency CBI failed to file the chargesheet even after more than 33 months of Raju been arrested

PROBABLE REASONS

PRESSURE TO MEET EXPECTATION

OVERCONFIDENCE

PERSONAL BENIFITS

WHY DID RAJU CONFESS???

RAJU WAS PROBABLY CONVINCED THAT THE GAP IN THE BALANCE SHEET WAS UNMANAGEABLE.

A PERSON CLAIMED HIMSELF TO BE A FORMER SENIOR EXECUTIVE IN SATYAM INVOLVED WITH ITS CONTRACT WITH THE WORLD BANK , ACTED AS A WHISTLE BLOWER WHOSE E-MAIL TO A SATYAM BOARD MEMBER TRIGGERED A CHAIN OF EVENTS.

THE GOVERNMENT

THE GOVERNMENT TOO IS EQUALLY GUILTY IN NOT HAVING MANAGED TO SAVE THE SHAREHOLDERS, THE EMPLOYEES AND SOME CLIENTS OF THE COMPANY FROM LOSING HEAVILY.

SATYAM UNDER RECONTRUCTION

Appointing New Board. Board appointed by

Government.

Tech Mahindra wins bid for Satyam scam.

VISION STATEMENT

“to leverage information, knowledge, and technology to enhance human endeavor.

CORE VALUES OF SATYAM

Belief in people Entrepreneurship Customer orientation Pursuit of excellance

EFFECTS OF SATYAM SCANDLE

Jobs of over 50000 technocrats were at risk.

Country`s booming economy was at risk.

The GDP fell by 0.4%. I.T sector suffered a downturn. India`s global image was tarnished. Indian stock market fell dramatically.

ACTIONS TAKEN

New board of directors were appointed. Disclosure of pledged securities. Increased financial accounting

disclosure. Adoption of international standards. Creation of new corporate code of

conduct by Ministry of Corporate Affairs.

Steps taken by ICAI.

CONCLUSION

More scandals like Satyam can be avoided if-

1.If auditing firm is honest.2.SEBI plays an active role.3. Periodic review of legal compliance

reports by independent directors.