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The Satyam Scandal

THE RISE OF SATYAM

Company Profile
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. Satyams network covers 66 countries and 53000 employees across six continents. It is listed in BSE, NSE, NYSE

AWARDS ACHIEVED
Top-50 Marketers Award, under the Resurgent Marketers category for 2010 by Pitch India. Mahindra Satyam BPO honored as Indias Most Customer-Responsive BPO CompanyAGC Networks, The Economic Times, Ernst & Young and Nielsen. Ranked # 1 in the ASTD BEST Award American Society for Training and Development (ASTD).

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
Maytas Acquisition
Last attempt to fill the gap.

Top officials were unaware


Only MD & CFO were others.

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

Satyam shares

Biggest single day fall for a stock in stock market 77% 175 Rs/-(Jan 6th)

Stock Market

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

Companies worth

11464 Crore

1607 Crore

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. RamaRaj u

V. Srinivas

S. Gopalkrishnan

T Srinivas

THE ILLUSIONISTS
Ramalinga Raju: B Rama Raju: Satyam Former Chairman Brother of Ramalinga Raju Former Managing director .

V Srinivas:
S Gopalakrishnan:

Ex-chief financial officer


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 if1.If auditing firm is honest. 2.SEBI plays an active role. 3. Periodic review of legal compliance reports by independent directors.