THE SATYAM SCAM SCAM
DEVAL SHAH SHAHIL PUNJANI RUSHANK RAJWAT PRAKRITI SETH DARSHIL SHAH

INTRODUCTION .

Ramalinga Raju. € On 26th August. 1991 it was converted into a Public Limited Company and went for PUBLIC ISSUE in 1992. € India s 4th biggest software company. € BSE IPO oversubscribed 17 times when made public. .Company Profile € Set up in the year 1987 by B.

 It serves over 654 global companies.000 IT professionals across development centers in 6 continents. NYSE and Euronext (Amsterdam).Company Profile  It is listed in BSE. NSE. . 185 of which are Fortune 500 corporations.  The company employs 53.

Rama Raju Promoter & CEO. Satyam Computers Ltd. B. Satyam Computers Ltd. . Ramalinga Raju Founder & Chairman.B.

Background of the Fraud Case .

Larsen & Toubro InfoTech. Cognizant (CTSH). and even private equity players KKR and TPG.PA). Wipro. Clients complained about lack of attention. ‡ Raju started using the manpower and other resources for the Satyam Company for the welfare of his sons¶ real estate business. Company owned by Two sons of Raju were investing in the real estate business and recently their real estate business was not in good shape. Cap Gemini (CAPP. IBM (IBM). there was a long list of reported suitors for Satyam. They included HCL Technologies. business suffered. .Background of the Fraud Case ‡ Maytas Infra Ltd. ‡ Before the shocking confession from Raju.. ‡ Four main shareholders of Satyam Company were horrified by the changing behavior of Raju. and many professional managers began to leave. ‡ With Sat yam's management focused elsewhere. HewlettPackard (HPQ).

online mobilepayments service Upaid Systems . y But what was widely seen as a move by Raju to bail out his sons was actually aimed at covering Sat yam's tracks through fictitious cash transfers.‡ Ramalinga Raju on Dec. a Texas court is scheduled to conduct a hearing on the case Jan. y Raju was forced to reverse his decision under the shareholder¶s pressure. 16 proposed that Satyam would buy a 31 percent stake in Maytas Infra from his family.which filed a case of intellectual fraud and forgery against Satyam in 2007. as well as all of Maytas Properties. and an additional 20 percent from minority shareholders. for $1. y What triggered the wrongdoing confession was investment banker DSP Merrill Lynch's letter to the company (followed by another to Sebi this morning) terminating its 10-day-old agreement with Satyam to advise it on strategic options because of ``material accounting irregularities´. ( One day before confession) . 7. y Satyam ADR¶s lost 50% of their value over night. y December also brought news of pending litigation by a former client.6 billion.

Impact of the Confession .

‡ Raju family¶s holding in Satyam falls to 3. and customers.64%. ‡ Tech Mahindra made a public statement that it would not be interested in acquiring Satyam "in the current environment. ‡ Indian rivals will now come under greater scrutiny by regulators. sat yam s official auditors are under scrutiny.Impact of the Confession ‡ Satyam had become "India's Enron. calling the case "an accounting fraud beyond imagination [and] an embarrassing and shocking episode in Indian corporate governance. investors. ‡ Price waterhouse cooper. ." ‡ Damaged India's reputation as a reliable provider of IT services." said CLSA India analyst Bhavtosh Vajpayee.

469. plunged around 80 per cent. after Satyam Computers Services. which had gained over 688 points in the last four sessions of 2009.95.586.05 points to reach 9.88. and IBM could benefit from $500 to $700 million in business from Satyam over the next six months if the company flounders. ‡ Bse Fell 700 points because of this. losing 749. the country's fourth-largest software developer. Wipro. ‡ Satyam Computer crashed by Rs 139.510. It touched the day's low of 9. Tata Consultancy Services. tumbled below the crucial 10.‡ Infosys.69 per cent to close at Rs 39.15 or 77. ‡ The declining Sensex recorded the biggest single-day loss in the past two months. ‡ The Sensex. after the Chairman announced the company had falsified accounts and assets for several years. . showing a wide fluctuation of nearly 960 points. Accenture.72 points.000 point level. the highest since getting listed in 1992.15 and a high of 10.

20 points during the day.40 points at 2. A day after the sensex crossed the 10.‡The 50-share National Stock Exchange index Nifty tumbled by 192. after hitting the day's low of 2.888.3 lakh crore (or trillion) of market capitalization. . duty reductions and accelerated government spending. ‡ The timing of what is being called `India's Enron' could not have come at a worse time .just when the stock market was showing signs of responding positively to the Centre and RBI's moves to stimulate the economy through interest rate cuts.40.000-mark. it plunged by 749 points.920. wiping out almost Rs 1.

SATYAM STOCK CHART .

50 AVERAGE VOLUME 3 mo 42.85 DAY LOW -52 WEEK LOW 01/9/09 .00 PREVIOUS CLOSE 38.02% K = Thousands M = Millions B = Billions .Satyam Stock Chart OPEN -DAY HIGH -52 WEEK HIGH 05/30/08 .94 EX-DATE 10/29/08 DIVIDEND 7.11.3x DIVIDEND YIELD 18.00 MARKET CAP 26.5M SHARES OUTSTANDING 673.544.2B DILUTED EPS TTM 29.9M P/E TTM 1.

Accounting Scam .

‡ Satyam faced is the biggest fraud in India's corporate history. ‡ The company management. mainly disgraced chairman B Ramalinga Raju. . kept everyone in the dark for a decade.

Raju confessed that Satyam's balance sheet of 30 September 2008 contained: 1.230 crore on account of funds was arranged by himself. An understated liability of Rs. 490 crore (as against Rs. 4. 2. An accrued interest of Rs.The Scam« On 7 January 2009. 1.651 crore in the books. company¶s previous Chairman Ramalinga Raju resigned after notifying board members and the Securities and Exchange Board of India (SEBI) that Satyam's accounts had been falsified. 3.361 crore reflected in the books.040 crores as against Rs 5. Inflated figures for cash and bank balances of Rs 5. An overstated debtors' position of Rs. 2. 376 crore which was non-existent. ‡ .

INFLATED 5040 CR. ACTUAL CASH IN BANK WAS 321 CRORES.ACTUAL DEBT WAS 2161. NO ACCRUED INTEREST 376. OVERSTATED 490 CRORES. .34 CR.

UNDERSTATED LIABILITY 1230 Cr.RAJU 5. Cr) Rs.136 Cr .040 + 376 + 490 (Rs. 1. Which was ARRANGED BY MR. 7.230 Cr Rs.

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Actions Taken .

Subodh Aggarwal . ‡ The special committee will headed by ICAI Vice-President Uttam Prakash Aggarwal . . 11.& K R Maheshwari. a banker and chartered accountant. ‡ ICAI council members ± S L Dogra. Amarjeet Chopra. Akshay Gupta .Actions Taken ‡ Chartered accountants body ICAI constituted a six-member special committee to look into the auditing of crisis-hit Satyam Computer and will submit its auditing report on February.

y The former chief executive officer (CEO) of Satyam Computers.a body set up to crack complex white collar crimes-. who inspected the books of Satyam which were being fudged for the past 7 years.to probe the financial irregularities in Satyam Computer Services and report its findings in three months. fraud and and other criminal charges under various sections of Indian Penal Code (IPC). y Raju was arrested on charges of cheating. . but they could not do so as Raju was in the custody of CID.‡ Government asked the Serious Frauds Investigation Office (SFIO)-. y The Securities and Exchange Board of India (SEBI) officials came to Hyderabad to investigate the entire scam. y This decision to refer Satyam to SFIO is based on the recommendation of the Registrar of Companies (RoC) in Hyderabad. Raju and his younger brother Rama Raju were remanded to judicial custody by sixth additional Metropolitan magistrate for 14 days (ie till January 23) and both were shifted to Chanchalguda Central Jail near the city.

the country¶s market regulator. ‡ T. Three ³eminent persons´ were selected to serve on Satyam¶s board.& ‡ C. a former head of the National Association of Software and Services Companies. ‡ Amarchand & Mangaldas. Where as Chartered accountants Brahmayya and Co of Chennai have been named internal auditors with immediate effect. the chairman of the Housing Development Finance Corp. Suresh A Shroff and Co have been appointed legal advisers to Satyam board. MANOHARAN IS THE NEW CHAIRMAN ( Former President of ICAI). a lawyer and former member of the Securities and Exchange Board of India. ‡ Kiran Karnik. Achuthan.Satyam's New Board Government of India announced a new board for Satyam. The three are :‡ Deepak Parekh. . the minimum number of directors required under Indian law.N.

Actual Employees of Satyam are 40. . ‡ Raju s jail custody has been extended till 31 st Jan.000.000 which were shown as 53.Recent Developments ‡ It has been said that companies employees have been inflated in the books. was signing off 20 crore rs of the company in the name of fictitious employees. ‡ Raju admits of diverting funds to Mayta s properties and Maytas Infra. ‡ L & T stake in Satyam have been increased to 12%. ‡ Two pricewaterhouse Coopers officials have been arrested in this fraud case. ‡ Raju. ‡ Satyam 3rd chief financial officer has been arrested.

If SEBI plays an active role. . Review legal compliance report periodically by independent directors.Conclusion ‡ Conclusion The Satyam Scam can be avoided : If auditor firm is honest.