WELCOME

SATYAM CASE STUDY

 Table Of Contents

 Introduction.
 What Went Wrong?
 Why Did Raju Confess?
 Confessions of Raju.
 Who’s the Culprit?
 How was this done.
 Post Actions After Scam.
 Merge of Mahindra and Satyam Computers.
 Future Plans Of Tech Mahindra.
 Conclusion.
 INTRODUCTION
SATYAM COMPUTER SERVICES LIMITED

 SATYAM COMPUTERS WAS FOUNDED IN 1987.

 IT CONVERTED INTO PUBLIC LTD CO. IN 1991.
 THE COMPANY OFFERS CONSULTING AND
INFORMATION TECHNOLOGY SERVICES SPANNING
VARIOUS SECTORS.
 SATYAM’S NETWORK COVERS 66 COUNTRIES AND
53000 EMPLOYEES ACROSS SIX CONTINENTS. IT IS
LISTED IN BSE, NSE, NYSE.
 WHO IS B.RAMALINGA RAJU ?

 Ramalinga raju was born on september 16,1954 in a family

of farmers .
 He founded satyam computers and was its chairman until
january 7, 2009 when he resigned from the satyam board
after admitting to corporate fraud.
 What Went Wrong?

 The success-run of the company was halted rather

abruptly on December 16,2008, they announced that it
will acquire two group firms –1. Maytas properties2.
Maytas Infra
 The Board Of Directors of Satyam had approved the
founder’s proposal to invest the company’s funds in
buying stakes for an amount equivalent to USD 1.6 billion
against their book worth of only USD 225 million in both
firms.
 The two firms, Maytas Properties and Maytas Infra
Limited was founded by chairman Ramalinga Raju’s sons.
 He was blamed that he was using the funds of investors
for the family business.
 There were allegations that funds form satyam were
diverted to maytas, causing the government agencies to
verify the companies records.
 7 January 11 January 22 January
2009 2009 2009

• Price
• Company Waterhouse,a
Chairman nnounced that • CID reports
Ramalinga Satyam in court.
Raju resigned. rendered its
audit reports.
 Why Did Raju Confess?

 The gap in the balancesheet reached unmanageable

proportions and could not be filled any how in future.
 The whistle blower’s email to a Satyam board
member triggered a chain of events.
 This person had written to Krishna G. Palepu, one of
the company’s independent director.
 The mail spead like wildfire with Palepu forwading it
to other directors & key people including
S.Gopalkrishnan of PricewaterhouseCoopers(PwC) ,
Satyam’s statutory auditor.
Confessions Of Raju

 “The scam of INR 71.36 billions in the company’s

balancesheet was a result of small manipulation
done many years back.”
 Raju wrote in the confession letter
“Every attempt to fill the gap failed.”
 It was like riding a tiger, not knowing how to get
off without being eaten.
 Who’s the culprit?
 Former CEO and founder of Satyam, Raju Ramalinga
confessed that he fudged the accounts of the company
and inflated earnings, profits etc.
 The company account books said that Satyam had over
Rs.5000 crore in the bank when it actually did not. Raju
said that he had been fudging account for several years
yet no one but he and his brother knew about this.
 Satyam’s CFO Srinivas Vadlamani said that he had never Raju Ramalinga &
paid much attension to the balance sheet. his brother

Srinivas
Vadlamani
 How was this done?
 Liabilities were understated by $1.23 billion.
 Debtors were overstated by 490 millions plus.
 Operating profits were boosted from Rs.61 crore to Rs. 649 crore.
 This was mainly done to hide the irregularities in the accounts. It was
also said that close association with political leaders is one of the
reasons.
 Raising fictitious bills for services that were never rendered
 To increase cash and bank balances correspondingly.
FABRICATED BALANCE SHEET
 Actions After Scam

 Appointing new board.

 Board appointed by the government.
a) Former Nasscom chief – Kiran Karnik,
b) Chairman HDFC - Deepak Parikh,
c) Former SEBI member – C. Achuthan.
 Satyam shares gained over 40% day after appointment
of new board.
 New CEO – A S Murthy.
Merger of Mahindra &
Satyam Computer
 Tech Mahindra Acquired Satyam on April 13,2009.
 On 13 April 2009, via a formal public auction process, a 46%
stake in Satyam was purchased by Mahindra & Mahindra owned
company Tech Mahindra.
 Effective July 2009, Satyam rebranded its services under the
new Mahindra management as "Mahindra Satyam”.
 The Board of Tech Mahindra and Mahindra Satyam approved the
merger on March 21, 2012.
 The Board of the New Tech Mahindra New CEO and MD Vineet
Nayyar was appointed as the Vice Chairman.
Future Plans of Tech
Mahindra
 Tech Mahindra will aim to almost double the Turnover to $5
billion by 2015 with focus on telecom, manufacturing and BFSI(
Banking, Financial services, Insurance).
 The merged entity has a combined workforce of 84,000,
including 36,000 in the erstwhile mahindra Satyam and 40,000
in Tech Mahindra.
 Tech Mahindra now focuses on four segments-telecom,
manufacturing, Healthcare and retail.
 Conclusions

More scandals like Satyam can be avoided if –

 If auditing firm is honest.
 SEBI plays an active role.
 Periodic review of legal compliance reports by
independent directors.
“
Thank you
”
Presented by:
Krina Merchant, Vidhi Patel, Zeel Shah, Disha Shah,
Payal Chedda, Divya Patel.