Case : Satyam Scam

Presented To: Presented By:

Prof. Tarika Singh Nikita Talukdar
MBA- A
 INTRODUCTION
• Satyam Computers was found in 1987.
• It was converted into Public Ltd Co. in 1991.
• The company offers consulting and information
technology services spanning various sectors.
• Ramalinga Raju found Satyam Computers and was its
Chairman until January 7, 2009 when he resigned
from the Satyam Board after admitting to corporate
fraud.
 RISE OF SATYAM
• 1987 :Satyam Computers Pvt. Ltd. was found.
• 1991 :June - First Fortune 500 Client.
August - Converted into Public Ltd. Co.
• 1994 :The Big Break- Allies with Dun and Bradstreet
Corp.
• 2000 :Declared one of the 100 most pioneering
technology company by World Economic
Forum.
• 2002 :Dataquest IT Man of the year award.
 WHAT IS THE SATYAM SCAM
ABOUT?

• It is about corporate governance and fraudulent

auditing practices allegedly in connivance with
auditors and chartered accountants. It is a fraud,
which mislead the market and other stakeholders by
lying about the company’s financial health. The
company misrepresented its accounts to its board,
stock exchanges, regulators, investors and all other
stakeholders.
 THE SCAM
• Raju and his brother, B Rama Raju, were arrested by
the Andhra Pradesh police on charges of breach of
trust, conspiracy, cheating, falsification of records.
• Raju has mislead various investors.
• Raju had also used dummy accounts to trade in
Satyam's shares.
• He has violated the insider trading norm.
• Funds from Satyam were diverted to Maytas.
 THE SCAM
• On 22 January 2009, CID told in court that the actual
number of employees was only 40,000 and not
53,000 as reported and that Mr. Raju had been
allegedly withdrawing 20 crores rupees every month
for paying these 13,000 non-existent employees.

• Raju wanted to take over his MAYTAS INFRA and

MAYTAS PROPERTIES.(A company of his sons).
He was blamed that he was using the funds of the
investors for the family business.
 WHO IS TO BLAME HERE?
• The promoters are primary culprits, although it is
almost impossible to misrepresent such facts without
the connivance of the auditors and some executive
board members. Independent directors, it seems, were
kept in the dark about the actual books of accounts.

• The role of external third party auditors, who were

tasked to ensure that no financial bungling is
undertaken to carry out promoters’ interest or hide
facts, have also been brought to question.
 CONSEQUENCES
• Before the scandal it’s share price was Rs 300 in Oct
2008. Just after this scandal the share price went
down to Rs 6.30.
• On 10 January 2009, the Company Law Board
decided to bar the current board of Satyam from
functioning.
• Bank of America and State Farm Insurance
terminated its engagement with the company.
• The New York Stock Exchange has halted trading in
Satyam stock
• Credit Suisse suspended its coverage of Satyam. The
Credit Suisse Group AG is a Swiss multinational
financial services company headquartered in Zurich,
Switzerland.
• Satyam was removed from its S&P CNX Nifty 50-
share index and Sensex as well.
• Satyam's shares fell to 11.50 rupees on 10 January
2009, their lowest level since March 1998, compared
to a high of 544 rupees in 2008.
 Impact Of The Scam
• Jobs of over 50,000 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.
• Before the scandal Satyam was the 4th ranked among
IT companies of India and on 9th jan2009 it became
least valuable IT company in India.
• On January 7th, 2009. Raju confessed in his letter
• “It Was Like Riding A Tiger , Not Knowing How To
Get Off Without Being Eaten”
• He disclosed a Rs 7000 Cr accounting fraud in the
balance sheets.
THANK YOU