How Did He Cook The Balance Sheet - Who Is To Be Blame !! - What Was Possible Solution ..? - Current Status of Company

INDEX
•How did he cook the balance sheet

•Who is to be blame…!!
•What was possible solution ..?
•Current status of company
INTRODUCTION
• The company offers information technology (IT) services

panning various sectors, and is listed on the New York Stock
Exchange and Euro next
• It is considered as an icon among the IT companies and at one

point had over a billion dollar revenue
• Satyam's network covers 67 countries across six continents.
• The company employs 40,000 IT professionals across

development centers in India, the United States, the United
Kingdom, the UAE, Canada, Hungary, Singapore, Malaysia,
China, Japan, Egypt and Australia.
• It serves over 654 global companies, 185 of which are Fortune

500 corporation.
• Satyam has strategic technology and marketing alliances with

over 50 companies.
• Apart from Hyderabad, it has development centers in India at

Bangalore, Chennai, Pune, Mumbai, Nagpur, Delhi, Kolkata,
Bhubaneswar, and Visakhapatnam
SATYAM MAYTAS FIASCO
1
• The BOD of Satyam had approved the founder’s proposal to
buy 51 per cent stake in Maytas Infrastructure and 100 % in
Maytas Properties.
• The total outflow for both the acquisitions was expected to be

US$ 1.6 bn comprising of US$ 1.3 bn for the 100% stake in
Maytas Properties and US$ 0.3 bn for the 51% stake in Maytas
Infra.
• This is the move that sparked a row over alleged violation of

corporate governance laws.
• This deal is not profitable for investors .So after this

announcement they started to raise their voices against the deal
MAYTAS INFRA
• It was started in the late 1980’s by Ramalinga Raju
• The main reason for the debacle of Maytas Infra is due to the
debacle of Satyam
MAYTAS PROPERTIES LTD
The company has huge land banks and the prices have dropped
down in the real estate significantly
SATYAM’S JUSTIFICATION FOR MAYTAS BUYOUT DEAL
• the integrated organization would be stronger and more

diversified to deal with the uncertainty of the market.
• feeling that in the recent times it is difficult to make a strategic

deal with other IT companies
2
REACTION OF INVESTORS AFTER THE ANNOUNCEMENT OF
ACCUSATION OF MAYTAS
Investment giant Templeton and brokerage house CLSA opposed to

this decision
RESULT OF INVESTOR’S REACTION
That aborted attempt at expansion precipitated a collapse in the price

of the company’s stock and a shocking confession of financial
manipulation and fraud from its chairman, B. Ramalinga Raju
WHY HE FAILED……???
The promoters decided to inflate the revenue and profit figures of

Satyam.
So to fill up this gap…
• Company announced Acquisition of 51%stake in Maytas Infra

and 100% stake in Maytas Properties on 16th Dec 2008 but The
deal was not profitable for investors
• Investors dumped Satyam’s stock and threatened action

against the management
• This was mainly done to hide the irregularities in the accounts

of Satyam
• It is also said the close association with the political leaders is

one of the reasons
CONFESSION
3
He tried to fill the gap b/w actual profits of the company and the
profits that were shown in records, balance sheets etc. and also tried
to cope up the situation till last minute. But now the situation were
beyond his hands and therefore he confessed the frauds (on Jan 7,
2009) made by him by showing inflated profits in the balance sheet
According to the’ confessional’ statement of Mr. Raju, the balance

sheet shortfall was more than.
The following statement he made in his confession letter – “Every

attempt to eliminate the (balance sheet)
WHAT WENT
4
• Simple manipulation of revenues and earnings to show superior
performance
• Raising fictitious bills for services that were never rendered.
• To increase the Cash & bank balance correspondingly.
• Operating profits were artificially boosted from the actual Rs

61 crore to Rs 649 crore
AND HOW….????
• Its financial statements for years were totally false, cooked up

and...
• The Debtors were overstated by 400 millions plus.
• The interest accrued and receivable
SATYAM SCAM: SO WHO IS TO BLAME?
5
• Who is guilty in this sordid state of events?
• Raju is by far the father of this fraud.
• But there were others who are also culpable
SATYAM'S AUDITORS
PwC has written a letter to theBOD of Satyam that its audit may be
rendered "inaccurate and unreliable" due to the disclosures made by
Satyam's (ex) Chairman
IS IT REAL? HOW COULD AUDITORS MISS THE GAPING
• So was this a total lapse in supervision or were the bank

statements forged? No one knows yet.
• The company officials said they relied on data fom the reputed
auditors
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.
OTHER COMPANY BIGWIGS
But could only two or three people have managed to cook the
books for years of a company so large? Highly unlikely.
THE SEBI
6
The Sebi had in December given a clean chit to Satyam in the probe
on violation of corporate governance law.
THE BANKERS
• If the auditors were conned, it means that either the bank

statement and certificates were forged
• Satyam's banks -- ICICIBank, HDFC Bank, Bankof Baroda, etc
DIRECTORS AND INDEPENDENT DIRECTORS
Despite the shareholders not being taken into confidence,

the directors went ahead with the management's decision.
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.
WHAT MANAGEMENT COULD DO??
• Change the name of the company.
• 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.
• The image of the company could be revived by a series of

press conferences highlighting the on going contracts with the
clients.
• It could also be merged with any other software company.

TECH MAHINDRA WINS BID FOR SATYAM SCAM
7
• Tech Mahindra is paying Rs1757 crore for a 31% stake in the
company, or Rs 58 per share.
• Satyam Computer Services has now 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 Computer
Services found a strategic investor

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INDEX

•How did he cook the balance sheet

• The company offers information technology (IT) services

• It is considered as an icon among the IT companies and at one

• Satyam's network covers 67 countries across six continents.

• The company employs 40,000 IT professionals across

• It serves over 654 global companies, 185 of which are Fortune

• Satyam has strategic technology and marketing alliances with

• Apart from Hyderabad, it has development centers in India at

SATYAM MAYTAS FIASCO

• The total outflow for both the acquisitions was expected to be

• This is the move that sparked a row over alleged violation of

• This deal is not profitable for investors .So after this

• It was started in the late 1980’s by Ramalinga Raju

MAYTAS PROPERTIES LTD

SATYAM’S JUSTIFICATION FOR MAYTAS BUYOUT DEAL

• the integrated organization would be stronger and more

• feeling that in the recent times it is difficult to make a strategic

Investment giant Templeton and brokerage house CLSA opposed to

RESULT OF INVESTOR’S REACTION

That aborted attempt at expansion precipitated a collapse in the price

The promoters decided to inflate the revenue and profit figures of

So to fill up this gap…

• Company announced Acquisition of 51%stake in Maytas Infra

• Investors dumped Satyam’s stock and threatened action

• This was mainly done to hide the irregularities in the accounts

• It is also said the close association with the political leaders is

According to the’ confessional’ statement of Mr. Raju, the balance

The following statement he made in his confession letter – “Every

• Raising fictitious bills for services that were never rendered.

• To increase the Cash & bank balance correspondingly.

• Operating profits were artificially boosted from the actual Rs

• Its financial statements for years were totally false, cooked up

• The Debtors were overstated by 400 millions plus.

• The interest accrued and receivable

SATYAM SCAM: SO WHO IS TO BLAME?

• Raju is by far the father of this fraud.

• But there were others who are also culpable

IS IT REAL? HOW COULD AUDITORS MISS THE GAPING

• So was this a total lapse in supervision or were the bank

OTHER COMPANY BIGWIGS

• If the auditors were conned, it means that either the bank

• Satyam's banks -- ICICIBank, HDFC Bank, Bankof Baroda, etc

DIRECTORS AND INDEPENDENT DIRECTORS

Despite the shareholders not being taken into confidence,

The government too is equally guilty in not having managed to save

WHAT MANAGEMENT COULD DO??

• Change the name of the company.

• Reconstitution of the board:-

• Try building confidence in the clients to get back the lost

• The image of the company could be revived by a series of

• It could also be merged with any other software company.

• Satyam Computer Services has now zoomed 15% to Rs 54.20

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