SATYAM CASE

Satyam-Saga
 MANAGING DIRECTOR
NEW VICE CHAIRMEN & MANAGING
EX MANAGING DIRECTOR DIRECTOR
RAMALINGA RAJU ANAND MAHINDRA
PENALTY
1. Under the companies act, if you present fraudulent
accounts to shareholders, then in itself is an offence but
the amount of publishment is not as severe as under
SEBI’s Law.
2. Under the IPC this is cheating under section 420 and
that could involve atleast 7 years imprisonment.
3. It’s criminal offence under section 24 of the SEBI Act
and could mean penalty and imprisonment of upto 10
years.
4. The audit company, Price Water House Coopers, which
was supposed to pay a sum of rs. 5 lakh.
ORGANISATIONAL
STRUCTURE

CEO

C.P GURNANI
Board Members


Vineet Nayyar
C. Achuthan
T.N. Manoharan
C.P. Gurnani
Sanjay Kalra
ULHAS N. YARGOP
 On 7 January 2009, company’s 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:

Inflated figures for cash and bank balances of Rs 5,040 crore (US$ 1.04 billion) (as
against Rs 5,361 crore (US$ 1.1 billion) crore reflected in the books).

An accrued interest of Rs. 376 crore (US$ 77.46 million) which was non-existent.

An understated liability of Rs. 1,230 crore (US$ 253.38 million) on account of funds
was arranged by himself.

An overstated debtors' position of Rs. 490 crore (US$ 100.94 million) (as against
Rs. 2,651 crore (US$ 546.11 million) in the books).

Raju claimed in the same letter that neither he nor the managing director had
benefited financially from the inflated revenues.

He claimed that none of the board members had any knowledge of the situation in
which the company was placed
 SATYAM-MAYTAS DEAL

 Maytas was a company owned by the Raju

Family with a majority stake of 36%
 Chairman of Satyam, B.R. Raju proposed to
purchase maytas for cash.
 B.R. Raju proposed the deal with an intention
to Cover up the inflated cash balance.
 The investor objected the deal as entire cash of
Satyam was being transferred to promoters
through Maytas.
 B.R. Raju called of the deal to avoid getting
caught and being exploited.
WHAT MANAGEMENT COULE
DO?
•Change the name of the company.

Reconstitution of the board :- Restore the

management of the company and appoint some
reputed people as the board of directors.

Try building confidence in the clients to get back

the lost projects.

The image of the company could be revived by a

series of press conferences highlighting the
on going contracts with the clients.

It could also be merged with any other software

company.
Tech Mahindra wins bid for Satyam Scam

Ø Tech Mahindra is paying

Rs1757 crore
for a 31% stake in the
company, or Rs 58
per share.

Ø Satyam Computer Services

has now zoomed 15% to Rs
54.20 ahead of the
announcement of the
highest bidder for
the company on April 13,
DON’T TRY THIS AT
OWN
SATYAM TO MAHINDRA
SATYAM
Mahindra Satyam.
 Type : Public
BSE:500376
NYSE: SAY ADR
 Founded : 1987 
 Headquarters: : Hyderabad, India
 Key people: : Vineet Nayyar (Chairman)
C.P. Gurnani (CEO)
A. S. Murty (CTO)
 Industry : IT Services
IT consulting
Software services
 Owner(s) : Mahindra Group
 Website : MahindraSatyam.net
Satyam : Dec-2008 to Jan-2009

Group 7 - ET Presentation 14
What happened next???
WHAT WENT NEXT?

16
SATYAM SHOULD
WIND UP NOW OR NOT ?

‘ NO’
INDIA’S STEP TO SAVE SATYAM
 The Indian Government had stated that it may
provide temporary direct or indirect liquidity
support to the company

 Govt. appointed new board of members for Satyam

consisting of heavy weights from India's corporate
sector.
Role of PWC

 PWC –Satyam’s auditors since Jun 2000

 Credibility of PWC???...“amount too big to be noticed”
 PWC:
“our audit in accordance with the auditing standards
generally accepted in India”
“Satyam's financial statements are the responsibilities
of the company's management”
“under Satyam’s management controls over financial
reporting and auditing”
“Audit reports between June 2000 to September 2008
unreliable”

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Reasons
1) It worked very hard to gain the confidence of
global corporations who have entrusted their
engineering and mission critical operations with
Indian companies.
2) It always made a great contribution in Indian IT
sector as well as it was always helpful for the
economy.
3) if we take a look at the ongoing project works of
Satyam we surely come to know that those
projects are good and successful, if they are
brought to the completion
4) With new and honest people working in
the company under a proper observation,
the company can be proved as an asset for
the nation.
5) If we look back at the track records of the
company before the scam, the project
works done are very good and are really
bankable.
CONCLUSION
Now at last we can conclude
that “the government can
use SATYAM as an example
to make companies
absolutely transparent”.
The profit margins were as low as 3%
as declared by Chairman in his letter to
the Board.

3. Maximize the returns of the

stakeholders

4. High interest of Promoter family in

the company & hence to protect it from
being taken over.
JOURNEY OF SATYAM
 Satyam Computer Services Ltd. was founded by B.Ramalinga
Raju in 1987.
 One of the most prominent companies of India, and it is also one
of the constituents of Nifty.
 It was the first company of India listed in three International stock
Exchanges i.e. NYSE, DOW and EURONEXT.
 4th largest IT company in India.
 9 % market share
 53,000 employees
 Revenue $2.1 billion
 The company offers a variety of information technology (IT)
services spanning various industry sectors.
 In June 2009, the company unveiled its new brand identity
“Mahindra Satyam” subsequent to its takeover by the Mahindra
Group’s IT arm, Tech Mahindra.
Satyam – A Snapshot
Major Satyam Clients
 LEADER TO BAD LEADER
He started an IT company with 20 employees that obtained contracts for
IT projects, mostly from US companies. Satyam rapidly developed and
became a multinational company, with thousands of employees spread
over many countries. Raju along with the then chief minister of Andhra
Pradesh Chandra Bab Naidu was able to obtain high scale government
contracts worth of US $1.2 Billion in Information technology for AP and
Indian government..

He founded Satyam Computers and was its Chairman until January 7,

2009 when he resigned from the Satyam board after admitting to
corporate fraud and cheating six million shareholders, some of whom
have lost their entire life savings. As of November 28 2009, Mr Raju has
yet to appear in court to face charges
 ROAD TO DISATER
 December’08 brought news of pending litigation by a
former client, online mobile-payments service Upaid
Systems which filed a case of intellectual fraud and
forgery against Satyam in 2007
 World Bank banned Satyam from doing any of its work
after it found Satyam employees had hacked into its
system and gained access to sensitive information
 It also did not renew their five-year contractOn Dec. 16,
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
 FACT SHEET
 Upaid is a privately-held company registered in the British Virgin Islands for which Satyam
Enterprise Solutions, a subsidiary of Satyam Computer, executed a project for developing software
for mobile prepaid technology. The project was executed between 1997 and 2002 for which
Satyam got $10 million, partly in shares due to Upaid’s inability to pay cash.

 Soon after, Upaid wished to patent the technology for which the software coding was done by Satyam.
For this, they needed the signatures of the 20 Satyam employees who worked on the project. Satyam
helped Upaid get these signatures though some of those employees had by then moved out of the
company.

 Armed with the patent, Upaid, filed a suit against Qualcomm and Verizon Wireless in 2005, alleging
that they were using the patented technology. However, one of the original Satyam employees who
had worked on the Upaid project had moved to Verizon by then. He pointed out that the signature that
was supposedly his on the patent application was a forged one. Upaid was forced to retreat after this
revelation. In 2007 it filed a suit against Satyam accusing it of forgery and fraud.
WHAT WENT WORNG T THE
COMPANY
Inflated figures for cash and bank balances of INR
5,040 cr. (as against INR 5,361 crore reflected in
the books).
Operating Profit were artificially boosted from the
actual 61 cr. to 649 cr.
Satyam also showed an interest earning of
Rs. 376 cr. that was fictitious.
 PWC –Satyam’s auditors since Jun 2000
Credibility of PWC???...“amount too big to be
noticed”
IMAPCT ON INDUSTRY
 It is surely going to be more difficult for other
Indian IT service players to win business.
 Undoubtedly, this is going to hurt the prospects
of foreign money flowing into India.
 Global perception about indian companies.
 Indian stock market slipped over 7% on 7th Jan.,
09.
Indian economy is at a threshold of either
leapfrogging ten years ahead or retracing
ten years backwards, after the global
economic slow down cycle gets completed.
ANALYSIS
As a leader , Mr. Raju did not justify. He
was undoubtedly a leader who try made a
great success but he became a bad leader,
but indulging himself into different
foggeries.
He uses unethical practices
Raju Raju sat on the wall
Raju Raju had a great fall
Balance sheet died,
Shareholders cried
Raju Raju made a fraud

Raju Raju
Yes baba
Cheating us
No baba
Telling lies
No baba
Open the balance sheet
HA! HA! HA!
Satyam Current News
 Satyam Lost 46 Customers to Rivals (Economic Times Reports)
Applied Materials Inc., Nissan Motor Co., Sony Corp., State Farm
Mutual Automobile Insurance Co. to name a few.

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