Professional Documents
Culture Documents
AKHILESH SINHA
SOUMYA GARG
PAWAN LUTHRA
SHREYA TIWARI
SREE CHAITANYA
1
Table of Contents
Abstract 3
Introduction4
10
The Mortgage market 10
15
Risk management 15
Corporate governance17
Financial distress19
Conclusion23
References24
2
ABSTRACT
Satyam Computers Services Ltd. was one of the pioneers in the field of Information
Technology and it was ranked fourth in the India in the business of computers
co mputers and
information technology services. Satyam has won the Golden Peacock Award for
the best Governance in the year 2007 and again in 2009. It is a matter of great irony
that the company which has “Satyam” word in its name means “Truth” as per
ancient Indian Language has presented all the lies in its financial Statements and
other records and there by failed to follow the proper Corporate Governance.
Governance.
There are three basic purposes of discussing the case study of Satyam Computers
services Ltd. in this research paper of corporate governance.
First: it is very much important to know how this company has got the rise in the
field of Information & Technology sector.
Second: to discuss how and why this financial scandal was conducted.
Third: what are the major constituents of Corporate Governance which were either
not followed by the Satyam Computers or wrongly presented to the regulatory
agencies.
3
INTRODUCTION
On 24th June Company was incorporated as a private limited co. for providing
Software development and consultancy services to large corporations.
corpor ations. The company
was founded by B. Rama Raju and B. RamalingaRaju. The company has set up two
Software Technology Parks, one at Mayfair Center, Seccunderabad and other at
Qutuballapur of Ranga Reddy district. Of A.P. The company also developed a
software development center in Bangalore.
In the year 1992, the company went in for a public issue of Equity Shares.
Shares . The
company has set up facilities at Secunderabad, Hyderabad, and Bangalore. The
Company has created infrastructural facilities consisting of workstations with
modern communications and networking equipment. They went for public issue
4
During the Year 1993, the company entered into a joint venture with Dun &
Bradstreet Corporation., U.S.A for development of softwares and in the year 1994 a
joint
joi nt v
vent
enture
ure comp
company
any called
call ed D
Dun
un & Brads
Br adstree
treett Sa
Satya
tyam
m So
Softwa
ftware
re Priv
Private
ate Limi
Limited
ted
was incorporated.
In the year 1994, the company promoted 4 subsidiaries. Viz Satyam Renaissance
Consulting ltd, Satyam Enterprise Solutions Private Limited, Satyam Infoway
Private Limited, and Satyam Spark Solutions Private Limited
Li mited which focusses on
software Products, Infoways Operates in the field of electronic commerce and
electronic data interchange software product.
B. Raju Brothers added additional space in Secunderabad and Bangalore. And new
SoftwareDevelopment Centers were opened in Hyderabad, Pune, Chennai and
Bhubaneswar.
In the year 1997, the company signed an agreement with Sterling Commerce,
International group of the U.S.A to provide electronic
electronic data interchange (E
(EDI)
DI) and
other value added electronic commerce solutions throughout India. The joint
venture which was made between D&B and Satyam Computers Services Private
limited in the year 1993 which was the largest single-location software of the world,
in which D&B is likely to buy 24% stake of the joint venture and gain majority
control. Later in the year, the company announced that it had divested its 24%
5
Satyam Computers Services Ltd has been selected by the Switzerland-Based World
economic Forum and World Link Magazine as one of India’s most remarkable and
rapidly growing entrepreneurial companies. Satyam Computer Services has acquired
23 acres in Bangalore to set up a new software development park.
The company is a 100% EOU under the software technology park scheme of
o f the
6
IT sector was estimated to be $400 billion and it was estimated that it will continue
to grow with a compound growth rate of 6.4%. To effectively compete, both against
domestic and global competitors, the company embarked on a variety of multi-
pronged
pron ged bus
busine
iness
ss gro
growth
wth stra
strateg
tegies
ies..
From 2003-2008, company has embarked a remarkable growth in the entire major
all financial metrics of in these period Satyam total sales was computed to be $467
million. The total Market Capitalization of the company was estimated to be $2.1
billio
bil lion
n By
B y Ma
March
rch 200
2008.
8. The Compani
Comp anies
es aannu
nnual
al compoun
comp ound
d growth
gr owth rat
ratee w
was
as
estimated to be 35%
35% from 2003-08. The Operating Profits
Profits were aver
averaged
aged 21% over
that period. Even EPS showed the annual growth rate of 40%. Finally, beginning in
January 2003, at a share price of 138. 08, Satyam’s stock would peak at 526.25 — a
300% improvement in share price after nearly five years. Satyam clearly generated
g enerated
significant corporate growth and shareholder value. The company was a leading star
and a recognizable name in a global IT marketplace. The external environment in
which Satyam operated was i ndeed beneficial to the company’ s growth. But, the
numbers did not represent the full picture.
It is a matter of great irony that the company which has “Satyam” word in its name
means “Truth” as per ancient Indian Language has present ed all the lies in its
financial Statements and other records and there by failed to follow the proper
Corporate Governance.
7
The time for Satyam Computers and the life of Mr. RamlingamRaju going very
smoothly without any interruption by regulators like SEBI, Ministry of Company
affairs etc. The Scam was exposed from the point where, Satyam planned to acquire
Maytas Infrastructure Limited, One of best infrastructure development and
8
is failed, then Raju’ s by writing a letter to board members and SEBI had to confess
that Accounts of Saytam Computers Services Limited has Irregularities. The facts
presente
pres ented
dbby
y MR
MR.. R
Raju
aju in his
h is llette
etterr to SEB
SEBII have
ha ve sho
shocked
cked ever
everyone
yone incl
includin
uding
g
Stakeholders and all Government regulators.
9
1. The major difference is created between Actual cash and Bank Balance and
Faked Balance i.e. 5040 Crores by creating numerous bank statements by
using his personal computer.
2. He also had shown interest of ` 376 Crores on those fake deposits.
3. He understated the Liability side of the balance sheet by `1230 crores.
4. He has overstated the Debtors by `490 Crores.
6. By doing so the operating profits for the quarter were also overstated by `588
crores.
10
The Table Clearly indicates the intention of Promoters of selling the staked at high
pricee by infl
pric inflatin
ating
g the
th e p
profit
rofitss aand
nd rreven
evenue
ue ffigu
igures
res.. In March,
Mar ch, 2001 the prom
promoter
oterss h
has
as
25.6% stake in Satyam Computers Services Ltd. but by decreasing every year it
comes to 2.18% in Dec 2008.
11
CORPORATE GOVERNANCE
Governance in India. It is really very unfortunate that within five months after
winning the Global Peacock Award, Satyam became the centerpiece of a
“massive” accounting fraud. Satyam Computersservices Ltd has failed on
almost every front of Corporate Governance and deceived every Government
regulator like SEBI, Registrar of Companies and Department of Corporate
Affairs.
12
the Companies regarding the presentation of Financial Figures and insiders trading.
13
The prices of the share of Satyam Computers were increased many folds but SEBI
was in total failure in detecting or even smelling any foul smell. The result of all
that insider trading was that the promoters of the Company have deliberately made
money in crores by misrepresenting the financial figures and there by increased
inc reased the
market value of the shares and sold their shares at those higher values and the end
result was that there was the erosion of the funds of the common people who have
invested in the shares of Satyam Computers relying upon the financial figures of the
that Company.
14
CONFESSION
He tried to fill gaps between 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 the situations are beyond his hands by
b y that time and therefore he
confessed the frauds (on Jan 7 th ,2009) made by him by showing inflated profits in
the balance sheet.
According to the ‘confessional’ statement of Mr.Ramal inga raju,the balance sheet
shortfall was more than ₹ 5064crores.
The gap in the balance sheet has arisen purely on account of inflated profits over a
period
peri od of las
lastt se
sever
veral
al ye
years
ars..
In india this moment was full of praise for
f or the manner and speed with which the
reconstituted board of satyam computer services found Tech Mahindra to operate
o perate
satyam .
15
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