SATYAM CASE STUDY
is an consulting and information
technology services company based in Hyderabad. y Moving away from the traditional agriculture business and set up a spinning and weaving mill named Sri Satyam.INTRODUCTION
y Satyam computer services Ltd. y The company went public in 1992. y In 1987. DVS Raju. Thereafter Ramalinga Raju shifted to the real estate business and started a construction company called Satyam Constructions. With the launch of Satyam Infoway (Sify) Satyam became one of the first to enter Indian internet service market.
. founded Satyam Computer Services along with one of his brothers-in-law.
y The company offers information technology (IT) services
.and has various other SBU.s * Maytas Properties * Maytas Infrastructure * Satyam BPO * Nipuna Services * Knowledge Dynamics * Nitor Global Solutions * CA Satyam ASP * Satyam Venture Engineering Services.
the United Arab Emirates . y The company employs 41.y Satyam's network covers 67 countries across six continents.000 IT professionals across
development centers in India . 185 of which are Fortune 500 corporations. Mumbai . and Visakhapatnam . Egypt and Australia . Pune . Singapore . Canada . Chennai . the United States .
. y It serves over 654 global companies. y Satyam has strategic technology and marketing alliances with over 50 companies. Hungary . Nagpur . Malaysia . it has development centers in India at Bangalore . Delhi . Japan . Kolkata . Bhubaneswar . China . the United Kingdom . y Apart from Hyderabad .
y This eventually led to a review of the deal by the government. y Both companies are owned by Raju's sons.
.for $1.6 billion. a veiled criticism by the vice president of India and Satyam's clients re-evaluating their relationship with the company. despite concerns raised by independent board directors.Maytas Infrastructure and Maytas Properties ) .Maytas Acquisation
y In 2008. the company attempted to acquire two
infrastructure companies founded by family members of company( founder Ramalinga Raju .
.400 crore in the
related panic selling.y Satyam's investors lost about INR 3. y Three members of the board of directors resigned on Monday 29th Dec 2008.000 crore) acquisition was met with skepticism as Satyam's shares fell 55% on the New York Stock Exchange . The USD $1.6 billion (INR 8.
data theft/malicious attacks"..World Bank
with it for 8 years due to inappropriate payments to the World Bank's staff. y The World Bank in its own statement has denied allegations of ". forgery and breach of contract.
y The World Bank has banned Satyam from doing business
. Upaid lawsuity UK mobile payments company Upaid Systems is suing Satyam for over 1 billion dollars on complaints of fraud. but confirmed the allegations on transactions benefiting Bank staff and inability to provide information sought on invoices submitted to the Bank.
040 crore (as against INR 5.700 crore and an operating margin of Rs 649 crore (24 per cent of revenues) as against the actual revenues of Rs 2. An understated liability of INR 1.112 crore and an actual operating margin of Rs 61 crore (3 per cent of reve nues).651 crore in the books).361 crore reflected in the books). An overstated debtors' position of INR 490 crore (as against INR 2. For the September quarter (Q2) they reported a revenue of Rs 2. It carried an accrued interest of INR 376 crore which was non-existent. This has resulted in artificial cash and bank balances going up by Rs 588 crore in Q2 alone
. carried inflated figures for cash and bank balances of INR 5.Accounting Scandal of 2009
y Ramalinga Raju confessed that Satyam's balance sheet as of the
September 30. 2008.230 crore on account of funds was arranged by himself.
y The gap in the balance sheet has arisen purely on account of
inflated profits over a period of last several years (limited only to Satyam standalone. It has attained unmanageable proportions as the size of company operations grew significantly (annualised revenue run rate of Rs 11.392 crore). books of subsidiaries reflecting true performance).276 crore in the September q uarter. What started as a marginal gap between actual opera ting profit and the one reflected in the books of accounts continued to grow over the years. 2008 and official reserves of Rs 8.
HSBC. therefore. Sebi. HDFC and ICICI Bank . y Later investigations showed that bank fixed deposits were also reportedly forged. has widened its inquiry to cover the role of banks and the internal auditor in Satyam . Citibank. has launched a coordinated investigation with the Registrar of Companies (RoC) to examine transactions between Satyam and its bankers BNP Paribas.
. which was investigating insider trading charges against Satyam·s promoters and some institutional investors.Role of SEBI
y Capital market regulator Securities and Exchange Board
of India (Sebi).
y Sebi·s investigation into the internal auditor·s role assumes significance because external auditor Price Waterhouse has said that its audit report on Satyam cannot be relied upon because it relied on information and explanations provided by the management
.y If it is established that bank officials were conniving with
Satyam·s management to issue false certificates. a case can be lodged against the bank employees.
Last year they hit a high of 544 rupees. The New York Stock Exchange has halted trading in Satyam stock as of 7 January 2009. Satyam's interim CEO.
. The government nominated noted banker Deepak Parekh . their lowest level since March 1998 . former NASSCOM chief Kiran Karnik and former Sebi member C Achuthan to Satyam's board. y Chartered accountants regulator ICAI issued show-cause notice y
to Satyam's auditor PricewaterhouseCoopers (PwC) on the accounts fudging.Present Scenario
y Ram Mynampati is presently. .50 rupees on 10 January 2009 . India's National Stock Exchange had announced that it will remove Satyam from its S&P CNX Nifty 50-share index on January 12 Satyam's shares fell to 11.
y Analysts said global firms. but the accounting fraud at Satyam Computer Services has further dented prospects in the slowdown-scarred sector. might delay giving large contracts as they step up due diligence
. scared by the revelations of a $1 billion accounting fraud at New York-listed Satyam.y The Indian Government has stated that it may provide
temporary direct or indirect liquidity support to the company y India·s top software services firms are expected to report quarterly profit rose by up to a quarter.
might delay giving large contracts as they step up due diligence. y Analysts said global firms. but the accounting fraud at Satyam Computer Services has further dented prospects in the slowdown-scarred sector.
. scared by the revelations of a $1 billion accounting fraud at New York-listed Satyam.Effects
y India·s top software services firms are expected to
report quarterly profit rose by up to a quarter.
which has become
India·s biggest corporate scandal. a magnet for thousands of young job seekers. Citigroup said in a report.
. y The $1 billion fraud whacked Indian stocks and the currency. was a negative for the industry. as investors worried over the damage to foreign investment in Asia·s third-largest economy and the oncebooming outsourcing sector.y The massive financial fraud at Satyam.