“Satyam Scandal”

BY VEENASHREE K PG11102

Contents
O Introduction

O Maytas Infra
O Buyout deal O Justification for the deal O Investors reaction O What went wrong? O How the balance sheet was inflated?

O Comparison of actual balances and inflated balances O Copy of detailed letter O Who is responsible? O Consequences O Solutions O Eventually… O Bibliography .

Introduction O Satyam Computer Services Ltd. National stock Exchange and the Mumbai Stock Exchange .Ramalinga Raju O The company was listed with New York Stock Exchange. is a consulting and information technology services company based in Hyderabad. India O It was found in 1987 by B.

China. O The company employs 40.O Satyam's network covers 67 countries across six continents. the UAE. Malaysia. Canada. Singapore. 185 of which are Fortune 500 corporations. the United Kingdom. Hungary. .000 IT professionals across development centres in India. the United States. Japan. Egypt and Australia. O It serves over 654 global companies.

Maytas Infra O The company is run by the sons of Ramalinga Raju O It was started in the late 1980’s by Ramalinga Raju Maytas Properties Ltd O One of the reasons for the debacle of Maytas properties is the ongoing economic slowdown O The company has huge land banks and the prices have dropped down in the real estate significantly .

O Company announced Acquisition of 51% stake in Maytas Infra and 100% stake in Maytas Properties .Buyout deal O Satyam was planning to buy the shares of Maytas Infra and Maytas Properties Ltd.

O Feeling that in the recent times it is difficult to make a strategic deal with other IT companies .Justification for the deal O The integrated organization would be stronger and more diversified to deal with the uncertainty of the market.

O The deal was not profitable for investors O Investors dumped Satyam’s stock and threatened action against the management . but not by the investors.Investors reaction O The deal was accepted by the board .

O He wrote a letter to the Board of the Company stating the irregularities.O This was the high time for the company and Mr. Raju confessed the irregularities that took place in the company. . Mr. Raju had to reveal the secret behind the acquisition of the Maytas O Thus.

. Satyam. O His rise to stardom in the corporate world coupled with immense pressure to impress investors made Mr.What went wrong? O The scam took place primarily on account of inflated profits and revenues over a period that lasted several years starting in April 1999 O Another factor was. Raju a compelled leader to deliver outstanding results. was under pressure to show extraordinary results in order to survive. as the smallest of the big players.

23 Billions o The Debtors were overstated by 400 millions plus. o The interest accrued and receivable by 376 Millions never existed . o Its liability was understated by $ 1.05 Billion) shown as cash for several years.How the balance sheet was inflated? o Never had Rs 5064 Crores (US$ 1.

00 Cash And Bank 321 Balances Interest Accrued on Fixed Deposits Liabilities Operating Profits Nil 490.34 Differences (Rs.34(overstated) 2166.36(overstated) 4991.05 61 1230 649 936.Comparison of actual balances and inflated balances Items Actual balances (Rs.05(understated) 588(overstated) .62 376.Crores) Balances after window dressing (Rs.62(overstated) 376. Crores) Sundry Debtors 2161. Crores) 2651.36 5312.

.

RAJU .Copy of detailed letter LETTER WRITTEN BY MR.

Corporate and Societal.Who is responsible? O The responsibility for a case like Satyam scam to happen is due to people involved in three levels O Individual. .

who is the master mind behind the Satyam scam is personally responsible for the saga at individual level. It is his greed that led him to resort to unethical and illegal behavior . Ramalinga Raju.Individual level O Mr.

Corporate level O Top management of the company O Auditors have to check final statement and verify it but. etc. HDFC Bank. PWC failed to do so O PwC was paid 3. the bank statement and certificates were forged O SEBI in December 2008 gave a clean chit to Satyam in the probe on violation of corporate governance law . Bank of Baroda.53 crore for the year 2008 as compared to 1 crore paid by Infosys as auditing fee O ICICI Bank.

including professional investors with detailed information and models available to them. retail investors none of them.Societal level O The institutional investor community. This raises serious questions on the expertise of thee valuation committee and the award itself O Government should have been able to detect the manipulation of financial statements through effective policies and regulations . detected the malfeasance O Satyam was the 2008 winner of the coveted Golden Peacock Award for Corporate Governance under Risk Management and Compliance Issues. the same year that the scam came out shortly afterwards.

50 O After the Scandal the Company Law Board decided to bar the current board of Satyam from functioning O New York stock exchange halted trading . 300.Consequences O Before the scandal the share prices of the company was Rs.but after the scandal it went down to Rs. 11.

O It could also be merged with any other software company . O The image of the company could be revived by a series of press conferences highlighting the ongoing contracts with the clients.Solutions O Reconstitution of the board :- 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.

Eventually… O Tech Mahindra wins the bid O Tech Mahindra paid Rs1757 crore for a 31% stake in the company. or Rs 58 per share .

net/KamaljeetSingh3/sat yam-scam-9772598 O http://www.reuters.com/doc/16782318/CaseStudy-of-Satyam-Scam .com/article/2009/01/07/satya m-text-idUKBOM36807220090107 O http://www.scribd.slideshare.scribd.Bibliography O http://www.com/doc/48238268/Satyam O http://uk.

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