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The Satyam Scandal


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THE RISE OF SATYAM


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

information technology services spanningvarious sectors.Mahindra Satyam is overall ranked #153

by Fortune India 500 in 2011.

Satyams network covers 66 countries and53000 employees across six continents. It is

listed in BSE, NSE, NYSE

Company Profile


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AWARDS ACHIEVED

Top-50 Marketers Award, under theResurgent Marketers category for 2010 byPitch India.Mahindra Satyam BPO honored as IndiasMost Customer-Responsive BPOCompanyAGC Networks, The EconomicTimes, Ernst & Young and Nielsen.Ranked # 1 in the ASTD BEST Award

American Society for Training and

Development (ASTD).


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What happened on January7,2009??


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THE DISASTROUS REVELATION

Accounting fraud of over 7800 crores rupees.From past 7 years accounting books werecooked:

-Profits were inflated

-Understated liability and overstated debts .

-Accrued interest.

-The gap in the balance had risen due to inflated

profits.


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FA B RICATED INCOME STATEMENTS


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Stock Charting


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THE LAST ATTEMPT


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The MAYTAS Acquisition

Maytas infra and Maytas properties : firmsowned by the sons of Raju.

Planned to buy the Maytas to fill the gap in thebalance sheet. Last attempt Raju made to fill the gap in the

balance sheet.

Major shareholder rebellion Acquisition was termed Poor corporate

governance.


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CONFESSION LETTER

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

It was l ike r id ing a tiger, not k now ing ho w to g et off with out being eaten.


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CONFESSION LETTER

Maytas AcquisitionLast attempt to fill the gap .

Top officials were unawareOnly MD & CFO were others.

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


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11464 CroreCompaniesworth

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 instock market

175 Rs/-(Jan 6 th)Satyamshares

1607 Crore

77%

All time low of Rs 11.50 on 9 th jan and closed at 23.75 Rs/-.

Compared to highest of 524.90 Rs/- on may 29,2008


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RamalingaRaju

B.RamaRaj

u

T SrinivasS.Gopalkrishnan

V. Srinivas


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THE ILLUSIONISTS

Ramalinga Raju: Satyam Former Chairman

B Rama Raju: Brother of Ramalinga RajuFormer Managing director .

V Srinivas: Ex-chief financial officer

S Gopalakrishnan: PriceWaterhouse Auditor

Talluri Srinivas: PriceWaterhouse Auditor


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CURRENT STATUS

GOVT CONCERNED ABOUT SATYAMEMPLOYEES.

GOVT TO HELP CBI IN SATYAM SCAM CASE.

RAMALINGA RAJU SENT TO POLICE

CUSTODY TILL 22 ND JANUARY.

CBI INVESTIGATING FURTHER.


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Ramalingam Raju along with 2 other accusedof the scandal, had been granted bail from

Supreme court on 4 November 2011 as theinvestigation agency CBI failed to file thechargesheet even after more than 33 months

of Raju been arrested


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PROBABLE REASONS

PRESSURE TO MEET EXPECTATION

OVERCONFIDENCE

PERSONAL BENIFITS


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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.


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THE GOVERNMENT

THE GOVERNMENT TOO ISEQUALLY GUILTY IN NOT HAVINGMANAGED TO SAVE THESHAREHOLDERS, THEEMPLOYEES AND SOME CLIENTSOF THE COMPANY FROM LOSINGHEAVILY.


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SATYAM UNDER

RECONTRUCTIONAppointing New Board.

Board appointed by Government.

Tech Mahindra wins bid forSatyam scam.


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VISION STATEMENT

to leverage information, knowledge, andtechnology to enhance human endeavor.


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CORE VALUES OF SATYAM

Belief in peopleEntrepreneurshipCustomer orientationPursuit of excellance


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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.


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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.


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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.


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