SATYAM

SCAM
It was like riding a
tiger, not knowing how
to get off without being
eaten.
"SINKING SHIP OR
TIP OF ICEBERG"

Company Profile
Set up 1987 to provide
services in IT sector.
Indias 4th biggest software
company.
Chairman and founder B.
Ramalinga Raju.
On 26th August, 1991 it was
converted into a Public Limited
Company and went for PUBLIC
ISSUE in 1992.

Company Profile
BSE IPO oversubscribed 17 times
when made public.
It is listed in BSE, NSE, NYSE and
Euro next (Amsterdam).
The company employs 53,000 IT
professionals across development
centers in 6 continents.
It serves over 654 global
companies, 185 of which are
Fortune 500 corporations.

Satyam Board Structure

B.Rama Raju
Promoter &
CEO

Other
Independe
nt
Directors

B.Ramalinga
Raju
Promoter &
Chairman

Ram
Mynampati
Whole time
Executive
Director

Dr M.
Srinivasa
n

GTB/Dr.
Reddys
Laboratorie
s

Srinivas
Vadlamani
Chief Financial
Officer

Prof.
Krishna G
Palepu

Mr. Vinod K
Dham

Sasken Communication/
Hellsoft /Montalvo
Systems and Newpath

Prof. M
Rammoha
n Rao

ISB Dean/
Bharat
electronics

Mr. T R
Prasad

Prof. V S
Raju

Former
CabinetSecretary
/GMR Infra/ GVK Taj

Satyam Share holding

Pattern
Institutional & NonInstitutional
Shareholders

Total Market capitalization

was Rs. 15,262 Cr
(still Dec 16, 2008 )

LIC
4.34%
L&T
4%
Lazard
Aberdeen
13.16%
Fidelity
ICICI Prudential
Citigroup
JP Morgan

SATYAM Meaning
TRUTH.
Now, Satyam :A Rs. 7000 cr
LIE.

So, How did it all begin?

 The promoters decided to inflate the revenue

and profit figures of Satyam. In the event, the
company had a huge hole in its balance sheet.

So to fill up this gap..

Time-Line
16 Dec
2008

Satyam gets board

approval for controlling
stake in Maytas
Infrastructure and
Maytas properties as
fully owned subsidiary
for $1.6B (Rs. 8000
Cr.)

What Is MAYTAS?
Maytas Infra
The company is run by the sons of Ramalinga Raju
It was started in the late 1980s by Ramalinga Raju
The main reason for the debacle of Maytas Infra is due to the debacle of
Satyam
Maytas Properties Ltd
One of the reasons for the debacle of Maytas properties was the then
ongoing economic slowdown
The company has huge land banks and the prices have dropped down in
the real estate significantly

Maytas Link
o Announcement to acquire 2 group firms owned by Chairman
Ramalinga Raju's sons.
o 51% stake in Maytas Infrastructure and 100 % in Maytas
Properties.
o US $ 1.3 billion - Maytas Properties and US$ 0.3 billion Maytas Infra.
o Total outflow for both the acquisitions was expected to be
US$ 1.6 billion.

Time-Line
17 Dec
2008

26 Jan
2009

Satyam backs out of

Maytas deal citing
investors protest
Satyam shares plunge
55 percent in NYSE.
BSE share plunges over
30%

The Actual Scam

Raising fictitious bills for

services that were never
rendered.
To increase the Cash &
bank balance from Rs 321cr to Rs 5040 cr.
Operating profits were
artificially boosted from
the actual Rs 61 cr to 588 cr.
The Debtors were overstated by 400 millions plus.

 Its financial statements for years were totally false,

cooked up.
Never had Rs 5040 cr (US$ 1.05 Billion) shown as
cash for several years.
Its liability was understated by $ 1.23 Billions

Fabricated Income Statements

Creative Account
Practice

Details of cash balances with Scheduled banks are not

there in the
Annual report

UNDERSTATE
D LIABILITY
1230 Cr.
Which was
ARRANGED
BY MR.RAJU

5,040 +
376 + 470
(Rs. Cr)

Overstated cash
balances,
Income
receivables

Rs.
1,230 Cr

Understated
Liabilities

Rs.
7,136
Cr
Fraud Amount

Post Scam
08
09
Jan Jan

10
Jan

BSE to replace
Satyam Computer
Former CFO
with Sun
Valdamani
Pharmaceutical in
Srinivas
its benchmark
remanded to
index Sensex with
judicial custody
effect from January
CFO Valdamani
12.
Raju brothers arrested by the
Srinivas, who is the
police on charges of criminal
financial custodian
conspiracy, cheating, forgery,
of the company
misappropriation of funds and
resigns
criminal breach of trust.
PwC shot back at Satyam,
saying in a media statement
Market Capitalization of satyam falls to Rs.
that the auditing was based
1,607 Cr from Rs.15,262 Cr. on Dec 16 in 19
on the audit evidence
trading sessions.
provided by Satyam and in
was accordance with
PwC in major
trouble. Stocks
of PwC clients
take a major
beating at the
BSE and NSE

Post Scam
13
14 15 16
Jan Jan Jan Jan

Government
hands satyam
case to SFIO

The newly appointed 3

member board appoints
auditing firm KPMG and
Delloitte to assist it in
cleaning the mess in the
scam tainted companys
accounts

Maytas stocks
hit the lower
circuit for 7th
consecutive
trading session
The government expanded the
three-member Satyamboard to six
to include S Balakrishnan of Life
Insurance Corporation, Tarun Das,
chief mentor of the Confederation
of Indian Industry and T N
Manoharan, former president of the
Institute of Chartered Accountants
of India

Issues Involved
Ethical Issues
Legal Issues
Accounting Issues
Corporate Governance Issues.

What made Raju To do

Scam ?

o Pressure
to improve
company's performance.

the

o Capture market.
o Achieve billion dollar sales mark.

Regulators investigating Satyam include

Action Taken By Authorities

Chartered accountants body ICAI constituted a six-member special committee to look into the auditing of
crisis-hit Satyam Computer and will submit its auditing report.
Government asked the Serious Frauds Investigation Office (SFIO)
This decision to refer Satyam to SFIO is based on the recommendation of the Registrar of Companies (RoC)
in Hyderabad, who inspected the books of Satyam which were being fudged for the past 7 years.
Raju was arrested on charges of cheating, fraud and and other criminal charges under various sections of
Indian Penal Code (IPC).
The Securities and Exchange Board of India (SEBI) officials came to Hyderabad to investigate the entire
scam, but they could not do so as Raju was in the custody of CID.
The former chief executive officer (CEO) of Satyam Computers, Raju and his younger brother Rama Raju
were remanded to judicial custody by sixth additional Metropolitan magistrate for 14 days and both were
shifted to Chanchalguda Central Jail near the city.

Finally Satyam acquired by

tech Mahindra.
Anand Mahindra, Chairman, Tech Mahindra, the new
owner of Satyam, company post the Rs 2,890-crore
takeover, giving hope and future to Satyams 45,00050,000 employees. A moment of truth for Satyam and a
victory for the government and the regulators.

Court Verdict
B Ramalinga Raju to a seven-year jail.
The court also fined Raju Rs 5.5 crore and other 9 coaccused Rs 50 lakh each.
SEBI Fined Raju brothers-Ramalingam and Rama-and three
former senior executives a total of Rs 1849 crore.
They were also charged another Rs 1220 crore by way of
interest charges at 12 percent.
All five were charged with insider trading and barred from
the securities market for 14 years.

Lessons Learned

Independent Director.
Disclosure of Pledged Securities.
Financial Accounting Disclosure.
Adopt IRFS
New Code of MCA.
Transparency at work
Government Intervention
Code of Conduct

Steps Taken After Satyam

Fraud

Introduction of new rules by the stock market regulator,

making it compulsory for promoters of companies to
disclose the percentage of shares pledged by them to
lenders

Appointment of Independent Auditors and Company

Secretary by Company Law Board to conduct Audit of any
private organization and time.

Set-up of 5 member Committee to suggest how to

implement effective compliance and Corporate Governance
in private sector by CLB.

B. Ramalinga Raju
Founder & Chairman, Satyam
Computers Ltd.

Thank
You !

Raju Raju
Yes Baba,
Cheating us
No Baba,
Telling Lies
No Baba,
Open the balance sheet
HA! HA! HA!