GUESS THIS POEM IS BELONGS TO ?

Raju Raju sat on the wall Raju Raju had a great fall Balance sheet died Shareholders cried Raju Raju made a fraud

FRAUD
In the broadest sense, a fraud is an intentional deception made for personal gain or to damage another individual; the related adjective is fraudulent.

THE SATYAM SCANDAL

SATYAM
Set up in the year 1987 by B.Ramalinga Raju. Indias 4th biggest software company. On 26th August, 1991 it was converted into a

Public Limited Company and went for PUBLIC ISSUE in 1992. BSE IPO oversubscribed 17 times when made public.

The Fraud
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.

Why on 7th Jan 2009?

DSP Merrill Lynch informed SEBI about

Material irregularities in Accounts on 6th Jan

Minutes of Meeting of 16th December,2008

were not submitted to RoC-(This created some doubts)

Hearing of Upaid- satyam case on 8th Jan at the US court

 On 7 January 2009, companys 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.
1. Inflated figures for cash and bank balances of

Rs 5,040 crores as against Rs 5,361 crore reflected in the books.

2. An accrued interest of Rs. 376 crore which was non-

existent.
3. An understated liability of Rs. 1,230 crore on

account of funds was arranged by himself.

4. An overstated debtors' position of Rs. 490 crore (as

against Rs. 2,651 crore in the books.

ACTUAL CASH IN BANK WAS 321 CRORES, INFLATED 5040 CR.

NO ACCRUED INTEREST 376.34 CR.

UNDERSTATED LIABILITY 1230 Cr. Which was ARRANGED BY MR.RAJU

5,040 + 376 + 490 (Rs. Cr)

Rs. 1,230 Cr

Rs. 7,136 Cr

Who found Irregularities

Investment banker DSP

Merrill Lynch was appointed by Satyam to look for a partner or buyer for the company.
DSP Merrill terminated its

engagement with the company soon after it found financial irregularities.

Merrill Lynch also sent the

information and the reason for their termination of the contract to the Bombay Stock Exchange, SEBI and even the New York Stock

The guilty

The promoters
Since the promoters, in this

case, held only about 8 percent shares, their idea to push through the Maytas acquisition deal was defeated by an angry lot of shareholders.

Directors and independent directors

The Satyam board, including its

five independent directors had approved the founder's proposal to buy 51 per cent stake in Maytas Infrastructure and all of Maytas Properties, owned by the family members of Satyam chairman B Ramalinga Raju. Despite the shareholders not being taken into confidence, the directors went ahead with the management's decision. The decision of acquisition was, however, reversed 12 hours later after investors dumped Satyam's stock and threatened action against the management.

The government
The government too is

equally guilty in not having managed to save the shareholders, the employees and some clients of the company from losing heavily.

Stakeholders Model
Shareholders

Public

Directors

SATYAM

Competitors

Customers

Employees

Employees
It is nights and heartburns for the over 53,000 employees of Satyam Computers as they conjure up worst case scenarios like non-payment of salaries, project cancellations , layoffs and equally bleak prospects outside. As the company's management tries to reassure shocked employees, jobs sites have got flooded from resumes of hundreds of Satyam employees. Job consultants believed that in the current economic climate , Satyam employees might have to settle for lower salaries outside. It is an employers' market.

Shareholders
An accounting fraud was the last thing investors in India would have imagined as a trigger for a reversal in investor sentiment. This scam is likely to affect the image of Indian companies among foreign portfolio investors. The share prices of Satyam saw a sharp fall after Rajus confession. The share prices fell down from 190 to 30 (approximately) in a matter of a day.

Clients
Satyam Computers clients include General Electric, Nissan Motors and General Motors. The debacle(sudden downfall) may force the clients to review their contracts and look at other offshore suppliers. Australian telecom company Telstra, had already decided to split a new contract worth $200 million among three Indian vendors. Another partner and customer of the company, Cisco Systems said that a proposed investment in Satyam Global

Public

The incident has hurt public perception of Corporate India and is likely to hurt shareholders' confidence in India Inc.

It resulted in incalculable and unjustifiable damage to Brand India and Brand IT in particular.

It is likely to dent the public credibility about the concepts of corporate governance in India

Competitors Competitors
The competitors

were mainly benefited positively from this scam. The Satyam Scam was also lesson to learn for the other organisations in the IT sector

Mahindra Satyam
Tech Mahindra paid Rs1757

Crore for a 31% stake in the company, at Rs 58 per share. Satyam Computer Services zoomed 15% to Rs 54.20 ahead of the announcement of the highest bidder for the company on April 13, 2009. In India this moment was full of praise for the manner and speed with which the reconstituted board of Satyam

New policies
1.1 Compliance with Laws, Rules and

Regulations. 2.1 Legal, Honest and Ethical Conduct. 2.4 Suspected Fraudulent behavior.

What Has India learnt?

Audit committees are being more careful to

ensure that the external auditors perform their role more diligently. We also find that the chairman of the board and members of the audit committee are being more careful and thorough in their questioning. Boards, too, are taking care to ensure that there are no slip-ups at their end.

THANK YOU