Satyameva Jayate

Truth Shall Prevail

A CASE STUDY ANALYSIS

BY
GROUP 5
 Agenda for Discussion
2

Satyam – A Brief History of the Indian IT Giant

Ramalinga Raju – Introduction about the IT czar
The Untamed Tiger – What was going wrong
The Tiger got Unleashed – Satyam Fiasco
The White Collared Thieves – Parties Involved
The Ripple Effect – Impacted Parties
Rise n Shine – How things were put in place
Lessons Learnt - Conclusion

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 Satyam – A Brief History of the
Indian IT Giant
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Moving away from traditional agriculture business set up
a spinning and weaving mill.
R.Raju shifted to real estate business- Satyam
constructions.
1987-
 Founded Satyam Computer Services with brother-in -law DVS Raju.
 Incorporated as private ltd company
1991-
 Offshore software project with John Deere & Co.(Satyam 1st
Fortune 500 cust.) announced
 Recognized as public listed company; debuts on BSE
1993
 Satyam signs JV with Dun & Bradstreet for IT services
 Awarded ISO 9001 certification
 Satyam technology centre(STC) inaugurated
 JV with GE announced
1999
 Satyam Infoway (Sify) becomes 1st Indian Internet company listed on
NASDAQ
 Presence established in 30 countries
2000
 Recieves National HRD award from GOI
 Dataquest names R.Raju as “ IT Man of the Year”
2001
 Listed on NYSE
2002
 BPO launched in Hyderabad
2006
 Sets 1st “global innovation hub” Singapore.
 Sets operations in China
2007
 R.Raju , named “Ernst & Young entrepreneur of the year”
 Opens development centre- Malaysia, Vizag(India)
 Disastrous Year
2008
 Adopts new tagline “Business Transformation together”
 “Innovation award for Partner Excellence” by software AG
Dec 16,2008
 Satyam board of directors approved proposal to acquire 100% stake in
Maytas properties & 51% in Maytas Infra
Dec17-
 Maytas Deal cancelled
Dec 29-
 Resignation of Directors Start
Jan 7,2009- Letter from Chairman tendering resignation &
financial irregularities
 Ramalinga Raju – Introduction
about the IT czar
8

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 Ramalinga Raju

• Born-1954
• Role model for efficient management
entrepreneurship, Leadership
• Qualification and awards
• Jesuit School
• MBA-Ohio University US
• Ernst and Young Entrepreneur of the Year in 2007
• Young Indians looked at him as their role model
 The Untamed Tiger – What was
going wrong
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• Cooking books : inflated profits and revenues

• Nepotism : close the gap- merging the two firms

• Omission of duty : management failed to see what is

going wrong

• Irresponsible directors

• Nelson’s eye : sebi was not informed about any fraud

moves of the company
 Continued…

• Promoters selling shares before the fall : shares

fallen from 26.1% to 3.6%- profit made over rs 1000
crore.

• Institutional investors

• Political establishment : some connection with the

political establishments
 The Tiger got Unleashed –
Satyam Fiasco
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 The Scam…

 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:
1. Inflated figures for cash and bank balances of Rs 5,040 crores as
against Rs 5,361 crore reflected in the books.

2. An accrued interest of Rs. 376 crore which was non-existent.

3. An understated liability of Rs. 1,230 crore on account of funds

was arranged by himself.

4. An overstated debtors' position of Rs. 490 crore (as against

Rs. 2,651 crore in the books.
 ACTUAL DEBT
WAS 2161.
OVERSTATED
490 CRORES.

ACTUAL CASH
IN BANK WAS
321 CRORES,
NO ACCRUED INFLATED
INTEREST 5040 CR.
376.34 CR.
UNDERSTATED
LIABILITY 1230
Cr. Which was
ARRANGED BY
MR.RAJU
 The White Collared Thieves –
Parties Involved
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 The Promoters
19

Since the promoters, in

this case, held only about
8 percent shares, their
idea to push through the
Maytas acquisition deal
was defeated by an angry
lot of shareholders.

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 Directors and Independent Directors
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 The Satyam board, including its five

independent directors had approved
the founder's proposal to buy 51 per
cent stake in Maytas Infrastructure
and all of Maytas Properties, owned
by the family members of Satyam
chairman B Ramalinga Raju.
 Despite the shareholders not being
taken into confidence, the directors
went ahead with the management's
decision.
 The decision of acquisition was,
however, reversed 12 hours later
after investors dumped Satyam's
stock and threatened action against
the management.

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 Other company bigwigs
21

Satyam's CFO Srinivas

Vadlamani has already
been arrested.
But could only two or three
people have managed to
cook the books for years of
a company so large? Highly
unlikely.

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 Satyam’s auditors
22

PwC has written a letter to the BOD of Satyam

that its audit may be rendered "inaccurate and
unreliable" due to the disclosures made by
Satyam's (ex) Chairman..

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 The Bankers
23

If the auditors were

FI's who suffered loss at Satyam
conned, it means that
either the bank statement
Name Share (in Crores)

Aberdeeen Asset Managers Ltd 3.44

Fidelity 2.3 and certificates were

ICICI Prudential Life Insurance 1.66 forged
Lazard Asset Management 1.45
Satyam's banks -- ICICI
LIC 1

Others Less than 1 Cr Bank, HDFC Bank, Bank

of Baroda, etc

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 The SEBI
24

The SEBI had given a

clean chit to Satyam in
the probe on violation of
corporate governance
law.

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 Investment Bankers
25

 Investment banker DSP Merrill

Lynch was appointed by Satyam to
look for a partner or buyer for the
company.
 DSP Merrill terminated its
engagement with the company soon
after it found financial
irregularities.
 Merrill Lynch also sent the
information and the reason for their
termination of the contract to the
Bombay Stock Exchange, SEBI and
even the New York Stock Exchange.
 However, despite the fact that DSP
Merrill Lynch blew the whistle, it is
not yet clear why it took such a long
time to inform the authorities, and
why it did not let the public know of
Satyam's misdeeds.

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 The Government
26

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.

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 The Ripple Effect – Impacted
Parties
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Stakeholders Model
 EMPLOYEES-It is nights and heartburns for the over 53,000 employees of
Satyam Computers as they conjure up worst case scenarios like non-payment of
salaries, project cancellations , layoffs and equally bleak prospects outside.
 SHAREHOLDERS-The share prices of Satyam saw a sharp fall after Raju’s
confession. The share prices fell down from 190 to 30 (approximately) in a
matter of a day.
 CLIENTS- The debacle may force the clients to review their contracts and look
at other offshore suppliers
 PUBLIC-The incident has hurt public perception of Corporate India and is
likely to hurt shareholders' confidence in India Inc.
 DIRECTORS- Satyam's CFO Srinivas Vadlamani and many others after this
scam, mainly due to their own mistakes of not actively participating in the
management of the organisation had been arrested.
 COMPETITORS-The competitors were mainly benefited positively from this
scam.
Rise n Shine – How things were
put in place

NEW BOARD APPOINTED

ON 11 JANUARY 2009, THE GOVERNMENT NOMINATED
NOTED BANKER DEEPAK PAREKH, FORMER NASSCOM
CHIEF KIRAN KARNIK AND FORMER SEBI MEMBER C
ACHUTHAN TO SATYAM'S BOARD.
Tech Mahindra paid Rs1757 Crore
for a 31% stake in the company, at Rs 58 per share.

Satyam Computer Services zoomed 15% to Rs

54.20 ahead of the
announcement of the highest bidder for the
company on April 13, 2009.
 Lessons Learnt - Conclusion
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 33

Satyam was a wakeup call for India to clean up its

act. But did India Inc wake up? Experts and industry
watchers remain divided in the aftermath. While
there is a set of people who believe that Satyam
definitely made promoters sit up and make
alterations, there is an equally strong lobby that says
nothing has changed in the real sense of the term. 

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 Thank you
34

PRESENTED BY: -

GAUTAM GULATI (219)

KEYOOR PRASHANT DIWAKER (224)
MEHAK AGGARWAL (226)
MONICA VIRBHAN (227)
UPASANA SINGH (265)
UROOJ ANSARI (266)
MOHIT MOTWANI (270)
SHIVANSH SHARMA (275)

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