“An Analysis of

SATYAM Scandal in
Indian Corporate
Sector”

A Project Report
 B. Ramalinga Raju
Founder & Chairman
Satyam Computers Ltd.

B. Rama Raju
Promoter & CEO,
Satyam Computer Ltd.
SHYAM LAL COLLEGE(E)
• Submitted by: Submitted to:
• N.G.PRAVEEN Dr. R.K.MALIK
• Roll No. 3653

B.Com (Hons) III Year

(Batch 2008-2011)
 ACKNOWLEDGEMENT
• I would like to convey my heart felt thanks to MY
PARENTS, who always gave their valuable suggestions
and guidance for completion of my project. I would also
like to thank MY BROTHER, who always supported me
during the course of completion of my project by making
me understanding and remembering important details of
my project that I would have otherwise lost. My project
has been a huge success only because of their support.

• NAME: N.G.PRAVEEN
• ROLL NO: 3653
 Introduction
• Founded in 1987 by B.Ramalinga Raju.

• India’s 4th largest IT Software and Services Company.

• Satyam (NYSE: SAY) is a leading global business & IT

services company .

• Satyam development and delivery centers in the US,

Canada, Brazil, the UK, Hungary, Egypt, UAE, India,
China, Malaysia, Singapore, and Australia.

• Satyam has strategic technology and marketing alliances

with over 50 companies.
• Apart from Hyderabad, it has development centers
in India at Bangalore, Chennai, Pune, Mumbai,
Nagpur , Delhi , Kolkata, Bhubaneswar, and
Vishakhapatnam.

• Satyam BPO Limited (Satyam BPO), a

majority-owned subsidiary of the Company, is
engaged in providing business process
outsourcing (BPO) services.

• Satyam operates in two segments: IT services and

BPO services.

• On January 4, 2008, the Company acquired Nitor

global Solutions Ltd. On April 4, 2008, it acquired
Bridge Strategy Group LLC.
 ACHIEVEMENT OF SATYAM
COMPUTER:
• 1987: Established as corporate or private
Limited
• 1991: Recognized as a Public Limited
company
• 1993 :Awarded ISO 9001 Certification
• 1999: Satyam launch 1st Internet service
(Sify Broadband)
• 2002 : Satyam BPO launched in Singapore
• 2005: Largest global development center
outside India

• 2006: Revenue exceeds US $ 1 billion.

• 2007: Becomes the first Asian company to

feature in the Training Magazine’s list of
Top 125 companies for learning.

• 2008: Won corporate governance (including

GOLDEN PEACOCK global award twice)
Controversies Surrounding Satyam
Ltd
• UPAID LAWSUIT
• WORLD BANK BAN
• MAYTAS ACQUISATION
• ACCOUNTING SCANDAL OF 2009
 UPAID CONTROVERSY:
• UK mobile payments company Upaid
Systems filed a case of intellectual fraud
and forgery against Satyam in 2007.
• On 9-December-2009 Satyam settled the
lawsuit with UPAID for $70Mn, of which
$45Mn was payable upon regulatory
approval, and the remaining $25MM was
payable a year after the initial payment
 WORLD BANK BAN:
• The first crack in the company's reputation
occurred during October, when the World Bank
fired Satyam and issued an eight-year ban against
the company.
• The World Bank accused Satyam of installing spy
systems on its computers and stealing assets from
the World Bank. In addition, during an October
conference call reporting earnings, one stock
analyst drew attention to large cash balances in
non-interest bearing bank accounts.
 Fraud is Uncovered:
• In December 2008, Satyam's Board of
Directors unanimously approved the
purchase of Maytas Properties and Maytas
Infrastructure, two companies unrelated to
the information technology field.
• The investors were outraged as Mr. Raju’s
family was holding major share in both the
companies than in Satyam.
• Shareholders viewed the transactions as an
attempt to siphon money out of Satyam into
the hands of the Raju family.
• Satyam's shares dropped nearly 10 percent
and four of the five independent directors
resigned. On December 30, analysts with
Forrester Research advised clients to stop
doing business with Satyam because of the
fear of widespread fraud. Satyam hired
Merrill Lynch to advise it on ways to
increase shareholder value.
• By January 5, 2009, rumors circulated
about several potential mergers between
Satyam and competitors.

• On January 7, just hours before Mr. Raju

disclosed the fraud, Merrill Lynch sent a
letter to the stock exchange indicating that it
was withdrawing from its engagement with
Satyam because during the course of its
representation it learned of material
accounting irregularities.
Satyam Scandal Finally Exposed

• Satyam fraud is the biggest fraud in the

India’s Corporate history.
• The company management, primarily its
disgraced Chairman B. Ramalinga Raju,
kept everyone in darkness nearly for a
decade.
 The Scam & Raju’s Confession
• On 7 Jan 2009, previous Chairman B. Ramalinga
Raju resigned after notifying Board
Members & SEBI that Satyam Accounts
were falsified.
• Raju confessed that Balance Sheet of 30
September 2008, contained:

cont….
 `

1. Inflated figures of Cash & Bank balance

of `5,040 crores as against `5,361 crores
reflected in the books.
2. An accrued interest of `376 crores, which
was non-exist.
3. An overstated Debtor’s position of `490
crores, as against `2651 crores in the book.
Raju’s confession statement…
ACTUAL DEBT
WAS 2161
CRORE,
OVERSTATED BY
490 CRORES.

NO CASH BALANCE
ACCRUED WAS 320 CRORE,
INTEREST INFLATED TO
5361.32 CRORES
UNDERSTATED
LIABILITY OF
1230 CRORES.
How the Fraud was Uncovered
• On January 7, 2009, Mr. Raju disclosed in a letter
to Satyam's Board of Directors that he had been
manipulating the company's accounting numbers
for years. Mr. Raju said the manipulation started
out small, and grew larger by the year. In the letter
he stated, "It was like riding a tiger, not knowing
how to get off without being eaten." Mr. Raju
stated that eventually, the stress of hiding the fraud
grew too much for him to bear
• "It was like riding a tiger, not knowing how
to get off without being eaten." Mr. Raju
stated that eventually, the stress of hiding
the fraud grew too much for him to bear”
 AFTERMATH
• The Indian stock market fell dramatically upon the
disclosure of the Satyam scandal. Indian
authorities quickly started an investigation and
pursued criminal actions that ensnarled Satyam's
executives, auditors, and Indian politicians.
Satyam successfully emerged from the crisis
through an asset sale during the spring of 2009.
The authorities' swift actions also restored
confidence in the Indian securities markets.
 HOW DOES THE SCAM
MATTER TO THE NATION ?
• JOB’S OF OVER 50,000 TECHNOCRATS WERE AT
RISK
.
• COUNTRY’S BOOMING ECONOMY FEARED
SLIGHT COLLAPSE AS COUNTRYS GDP FELL BY
ESTIMATED 0.4%.

• INDIA’S IT SECTOR SUFFERED DOWNTURN AS IT’S

IMAGE WAS TARNISHED GLOBAL.

• THE SATYAM FRAUD SCAM HAD RAISED

CONCERNS ABOUT THE POTENTIAL DAMAGE
TO INDIA’S APPEAL TO FOREIGN INVESTORS
&THE IT SERVICES INDUSTRY IN PARTICULAR
 Lessons learnt:
• As a consequence of this fiasco, the
overseas client may take a hard look at most
Indian outsourcing companies and
investment flows could be hit.
• Their acts and conduct impact the
reputation of India and, therefore, they must
ensure that the highest standards of
corporate governance are set.
THANKS!