THE SATYAM SCAM

Satyam Computers was founded in 1987.

It converted into Public Ltd Co. in 1992.

The company offers consulting and information technology services spanning various sectors.

Mahindra Satyam is overall ranked #153 by Fortune India 500 in 2011.

Satyam's network covers 66 countries and 53000 employees across six continents. It is listed in BSE, NSE, NYSE

INTRODUCTION

He is Ramalinga Raju born on September 16, 1954. A traditional agricultural family of the KSHATRIYA (RAJU) Community of Andhra Pradesh.

He founded Satyam Computers and was its Chairman until January 7, 2009 when he resigned from the Satyam board after admitting to corporate fraud.

THE RISE OF SATYAM 1987 :

1991 :

1994 :

2000 :

2002

Satyam Computers Pvt. Ltd. Born.

June - First Fortune 500 Client. August - Converted into Public Ltd.

Co.

The Big Break- Allies with Dun and Bradstreet Corp.

Declared one of the 100 most pioneering technology companies by World Economic Forum.

Dataquest IT Man of the year award.

He was first businessman in the field of construction and textiles.

Raju founded Satyam in 1987.He started an satyam computers with 20 employees

in 1987. Satyam was listed in INDIAN STOCK EXCHANGE in

1991. Listed in NEW YORK STOCK EXCHANGE in 2001. Satyam was listed in UNESCO(Amsterdam) in 2008. There were 52000 employees working in Satyam in

September 2008

HISTORY

ACHIVEMENT1999:-Ernst & Young Entrepreneur

of the Year Services Award 2000:- Dataquest IT Man of the

Year Award 2002:-Asia Business Leader Award 2007:- Ernst & Young

Entrepreneur of the Year (revoked after the fraud was confessed)

2008:-Golden Peacock Award for Corporate Governance (revoked after the fraud was confessed)

Employees spread over many countries

PEOPLE BEHIND THIS SCAM

Ramalinga Raju :B Rama Raju :

V Srinivas :S Gopalakrishnan: Talluri Srinivas :

Satyam former chairmanBrother of Ramalinga RajuFormer Managing DirectorEx-Chief financial officerPrice Waterhouse AuditorPrice Waterhouse Auditor

Raju and his brother, B Rama Raju, were arrested by the Andhra Pradesh police on charges of breach of trust, conspiracy, cheating, falsification of records.

Raju has mislead various investors. Raju had also used dummy accounts to trade in Satyam's

shares. He has violated the insider trading norm. Funds from Satyam were diverted to Mayas On 22 January 2009, CID told in court that the actual number ofemployees is only 40,000 and not 53,000 as reported earlier and that Mr. Raju had been allegedly withdrawing INR 20 crore rupees every month for paying these 13,000 non-existent employees.

THE SCAM

Raju wanted to take over his MAYTAS INFRA and MAYTAS PROPERTIES.(company of his sons). He was blamed that he was using the funds of the investors for the family business.

There were allegations that funds from Satyam were diverted to Maytas, causing the Government agencies to verify the infrastructure company’s records as well. .

,

HOW DID IT HAPPENED ?FLOATED TWO OTHER COMPANIES FOR THEIR OWN PURPOSE .

WITHOUT TAKING PERMISSION OF THE SHAREHOLDERS.

FAILED TO REPAY THE LOANS.

TRANSFER OF MONEY.

THE BALANCE SHEET AS OF SEPTEMBER 30, 2008 SHOWED- INFLATED (NON-EXISTENT) CASH AND BANK BALANCES OF RS. 5040 CRORE (AS AGAINST RS. 5312 CORE REFLECTED IN THE BOOKS)AN ACCRUED INTEREST OF RS. 376 CRORE WHICH IS NON-EXISTENTAN UNDERSTATED LIABILITY OF RS.1230 CRORE ON ACCOUNT OF FUNDS ARRANGED BY BR RAJU.

UNDERSTANDING THE SCAM!

SATYAM SHARES Biggest single day fall for a stock in stock

market.Rs. 175 ( Jan 6th) 77%

STOCK MARKET BSE sensex fell by 749.05 i.e., 7.25%. NSE fell by 192. .40 points i.e., 6.18%

COMPANIES WORTH 11464 crore 1607 crore.

All time low of Rs.11.50 on 9th Jan and closed at Rs.23.75/-

Compared to highest of Rs. 524.90/- on May 29,2008.

Previous record -Satyam has also been accused of frauds in

2001 and 2003.No importance was given to this.

Getting third party evidence -No bank confirmation on fixed depositsAccrued interest(fixed deposit)Debtors confirmation

Factors overlooked -Changing of accounting yearsHuge debt despite cash surplus

PWC – PARTNERS IN CRIME ???

JANUARY 7TH, 2009

“ IT WAS LIKE RIDING A TIGER , NOT KNOWING HOW TO GET OFF WITHOUT BEING EATEN “

CONFESSION

CBI Investigation Further

WHY DID RAJU CONFESS ???

The gap in the balance sheet reached unmanageable proportions and could not be filled anyhow in future.

The whistle blower whose email to a Satyam board member triggered a chain of events .

WHY DID RAJU CONFESS ???

PROBABLE REASONS PRESSURE TO MEET EXPECTATION :- Growing Competition Threat

of being overtaken OVERCONFIDENCE :- On his ability

PERSONAL BENEFITS :- Siphoning of funds Salary of non-existent 13000 employees

“Since about seven years we wanted to show more income in the accounts to avoid others from involving in the company affairs and any possible hostile acquisition.”

New board of directors were appointed.

Disclosure of pledged securities.

Increased financial accounting disclosure.

Adoption of international standards.

Creation of new corporate code of conduct by Ministry of Corporate Affairs. Steps taken by ICAI.

ACTION TAKEN

REGULATORS INVESTIGATING SATYAM

Before the scandal it’s share price was Rs 300 in oct.2008. Just after this scandal the share price go down to Rs 6.30.

On 10 January 2009, the Company Law Board decided to bar the current board of Satyam from functioning.

Bank of America and State Farm Insurance terminated its engagement with the company.

Credit Suisse suspended its coverage of Satyam. The Credit Suisse Group AG (SIX: CSGN, NYSE: CS) is a Swiss multinational financial services company headquartered in Zurich, Switzerland.

CONSEQUENCES

Jobs of over 50,000 technocrats were at risk.

Country`s booming economy was at risk.The GDP fell by 0.4%.

I.T sector suffered a downturn.India`s global image was tarnished.

Indian stock market fell dramatically.

IMPACT OF THE SCAM

Employees

Stock Market Share-holders

Stake-holders

Indian economy

Ramalingam Raju along with 2 other accused of the scandal, had been granted bail from Supreme court on 4 November 2011 as the investigation agency CBI failed to file the charge sheet even after more than 33 months of Raju been arrested Appointing New Board. Board appointed by Government.Tech Mahindra wins bid for Satyam scam.

SATYAM NOW

Appointing new board.Board appointed by government :

• former Nasscom chief – Kiran Karnik,• Chairman HDFC – Deepak Parikh• Former SEBI member – C. Achuthan .

Satyam shares gained over 44% day after appointment of the new board.

New CEO – A S Murthy Tech Mahindra acquired Satyam on April 13,2009.

SATYAM UNDER RECONSTRUCTION

ON 13TH APR 2009, VIA FORMAL PUBLIC AUCTION PROCESS, 46% STAKE IN SATYAM WAS PURCHASE BY MAHINDRA.

JULY 2009, SATYAM REBRANDED ITS SERVICE AS “MAHINDRA SATYAM”.

More scandals like Satyam can be avoided if-

1.If auditing firm is honest.2.SEBI plays an active role.3. Periodic review of legal

compliance reports by independent directors.

CONCLUSION

Presented by.... Anand Jaiswar… Sagar Sabat..