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Introduction to satyam computers, maytas infra & maytas properties Satyam-maytas fiasco Why raju was failed Confession of raju How did he cook the balance sheet Who is to be blame!! What was possible solution ..? Current status of company
Introduction
Satyam Computer Services Ltd. is a consulting and
information technology services company based in Hyderabad, India . It was found in 1987 by B.Ramalinga Raju. The company offers information technology (IT) services spanning various sectors, and is listed on the New York Stock Exchange and Euronext It is considered as an icon among the IT companies and at one point had over a billion dollar revenue
continents. The company employs 40,000 IT professionals across development centers in India, the United States, the United Kingdom, the UAE, Canada, Hungary, Singapore, Malaysia, China, Japan, Egypt and Australia. It serves over 654 global companies, 185 of which are Fortune 500 corporations.
alliances with over 50 companies. Apart from Hyderabad, it has development centers in India at Bangalore, Chennai, Pune, Mumbai, Nagpur, Delhi, Kolkata, Bhubaneswar, and Visakhapatnam.
2008, announced that it will acquire two group firms Maytas properties and Maytas Infra The BOD of Satyam had approved the founders proposal to buy 51 per cent stake in Maytas Infrastructure and 100 % in Maytas Properties.
expected to be US$ 1.6 bn comprising of US$ 1.3 bn for the 100% stake in Maytas Properties and US$ 0.3 bn for the 51% stake in Maytas Infra. This is the move that sparked a row over alleged violation of corporate governance laws. This deal is not profitable for investors .So after this announcement they started to raise their voices against the deal
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
properties is the ongoing economic slowdown The company has huge land banks and the prices have dropped down in the real estate significantly
more diversified to deal with the uncertainty of the market. feeling that in the recent times it is difficult to make a strategic deal with other IT companies.
attempt by the minority-shareholding promoters to use the firms cash reserves to buy out two companies owned by them Maytas Properties and Maytas Infra. That aborted attempt at expansion precipitated a collapse in the price of the companys stock and a shocking confession of financial manipulation and fraud from its chairman, B. Ramalinga Raju
WHY HE FAILED???? 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, consisting of non-existent assets and cash reserves that have been recorded and liabilities that are unrecorded So to fill up this gap..
Maytas Infra and 100% stake in Maytas Properties on 16th Dec 2008 but were unsuccessful.
The deal was not profitable for investors Investors dumped Satyams stock and threatened action against the management. Satyam Computer ADRs took a huge beating.
Confession
He tried to fill the gap b/w actual profits of the company and the profits that were shown in records, balance sheets etc. and also tried to cope up the situation till last minute . But now the situation were beyond his hands and therefore he confessed the frauds(on Jan 7, 2009) made by him by showing inflated profits in the balance sheet
According to theconfessional statement of Mr. Raju, the balance sheet shortfall was more than Rs.7000 crore. The following statement he made in his confession letter Every attempt to eliminate the (balance sheet) gap failed.
AND HOW.?????
Its financial statements for years were totally false, cooked up and...
Never had Rs 5064 crores (US$ 1.05 Billion)
shown as cash for several years. Its liability was understated by $ 1.23 Billions The Debtors were overstated by 400 millions plus. The interest accrued and receivable by 376 Millions never existed
CURRENT ASSESTS
2651.6 5312.62
376
ACTUAL DEBT WAS 2161 OVERSTATED 490 Cr
LIABILITIES
NO ACCRUED INTEREST 376 Cr UNDERSTATED LIABILITY 1230 Cr which was arranged by Mr.Raju 5040+376+1230 + 490= 7136
2700 690
ARTIFICIALLY ADDED 588 OPERATING PROFIT ADDED 588 INCREASING THE CASH RESERVE ONLY FOR Q2 ALONE TO 588
Operating Profit
Operatin Profit ( IN CRORES)
800 600 400 200 0 Series1 Sep '07 401.61 Dec '07 468.72 Mar '08 545.49 Quarter Jun '08 648.61 Sep '08 649.27 401.61 468.72 648.61 545.49 649.27
REVENUE
2700 3000 2112 2500 2000 1500 588 1000 500 0 Actual Revenue Q 2 Reported Difference
0 Actual Op Reported 400 300 61 200 100 700 600 500
Operating Profit
649 588
Difference
sordid state of events? Raju is by far the father of this fraud. But there were others who are also culpable.
money has indeed come or not. They check bank statements and certificates. So was this a total lapse in supervision or were the bank statements forged? No one knows yet. The company officials said they relied on data from the reputed auditors.
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.
The Sebi
The Sebi had in December
given a clean chit to Satyam in the probe on violation of corporate governance law.
The bankers
If the auditors were conned,
it means that either the bank statement and certificates were forged Satyam's banks -- ICICI Bank, HDFC Bank, Bank of Baroda, etc
not being taken into confidence, the directors went ahead with the management's decision.
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 ongoing contracts with the clients. It could also be merged with any other software company.