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    casestudysatyam-200727124029

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    casestudysatyam-200727124029

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    CASE STUDY PE

    SATYAM COMPUTER SERVICES LIMITED

     INTRODUCTION

     SATYAM COMPUTERS WAS FOUNDED IN 1987.


     IT CONVERTED INTO PUBLIC LTD CO. IN 1991.
     THE COMPANY OFFERS CONSULTING AND INFORMATION TECHNOLOGY
    SERVICES SPANNING VARIOUS SECTORS.
     SATYAM’S NETWORK COVERS 66 COUNTRIES AND 53000 EMPLOYEES ACROSS
    SIX CONTINENTS. IT IS LISTED IN BSE, NSE, NYSE.

     WHO IS B.RAMALINGA RAJU ?

     Ramalinga raju was born on september 16,1954 in a family of farmers.


     He founded satyam computers and was its chairman until january 7, 2009 when he
    resigned from the satyam board after admitting to corporate fraud.

     What Went Wrong?


     The success-run of the company was halted rather abruptly on December 16,2008,
    they announced that it will acquire two group firms –
    1. Maytas properties
    2. Maytas Infra
     The Board Of Directors of Satyam had approved the founder’s proposal to invest the
    company’s funds in buying stakes for an amount equivalent to USD 1.6 billion against
    their book worth of only USD 225 million in both firms.
     The two firms, Maytas Properties and Maytas Infra Limited was founded by chairman
    Ramalinga Raju’s sons.
     He was blamed that he was using the funds of investors for the family business.
     There were allegations that funds form satyam were diverted to maytas, causing the
    government agencies to verify the companies records.
     7 January
     7 T H JANUARY 2009 – Company Chairman Ramalinga Raju resigned.
     11 T H JANUARY 2009 – Price Waterhouse, announced that Satyam rendered its audit
    reports.
     22ND JANUARY 2009 - CID reports in court.

    Enrolment No. 180500116020 Page 1


    CASE STUDY PE

     Why Did Raju Confess?


     The gap in the balancesheet reached unmanageable proportions and could not be filled
    any how in future.
     The whistle blower’s email to a Satyam board member triggered a chain of events.
     This person had written to Krishna G. Palepu, one of the company’s independent
    director.
     The mail spead like wildfire with Palepu forwading it to other directors & key people
    including S.Gopalkrishnan of PricewaterhouseCoopers(PwC), Satyam’s statutory
    auditor.

     Confessions Of Raju
     “The scam of INR 71.36 billions in the company’s balancesheet was a result of small
    manipulation done many years back.”
     Raju wrote in the confession letter “Every attempt to fill the gap failed.”
     It was like riding a tiger, not knowing how to get off without being eaten.

     Who’s the culprit?


     Former CEO and founder of Satyam, Raju Ramalinga confessed that he fudged the
    accounts of the company and inflated earnings, profits etc.
     The company account books said that Satyam had over Rs.5000 crore in the bank
    when it actually did not. Raju said that he had been fudging account for several years
    yet no one but he and his brother knew about this.
     Satyam’s CFO Srinivas Vadlamani said that he had never paid much attension to the
    balance sheet.

     How was this done?


     Liabilities were understated by $1.23 billion.
     Debtors were overstated by 490 millions plus.
     Operating profits were boosted from Rs.61 crore to Rs. 649 crore.
     This was mainly done to hide the irregularities in the accounts. It was also said that
    close association with political leaders is one of the reasons.
     Raising fictitious bills for services that were never rendered.
     To increase cash and bank balances correspondingly.

    Enrolment No. 180500116020 Page 2


    CASE STUDY PE

     FABRICATED BALANCE SHEET

     Actions After Scam


     Appointing new board.
     Board appointed by the government.
    a) Former Nasscom chief – Kiran Karnik,
    b) Chairman HDFC - Deepak Parikh,
    c) Former SEBI member – C. Achuthan.
     Satyam shares gained over 40% day after appointment of new board.
     New CEO – A S Murthy.

     Merger of Mahindra & Satyam Computer


     Tech Mahindra Acquired Satyam on April 13,2009.
     On 13 April 2009, via a formal public auction process, a 46% stake in Satyam was
    purchased by Mahindra & Mahindra owned company Tech Mahindra.
     Effective July 2009, Satyam rebranded its services under the new Mahindra
    management as "Mahindra Satyam”.
     The Board of Tech Mahindra and Mahindra Satyam approved the merger on March
    21, 2012.
     The Board of the New Tech Mahindra New CEO and MD Vineet Nayyar was
    appointed as the Vice Chairman.

    Enrolment No. 180500116020 Page 3


    CASE STUDY PE

     Future Plans of Tech Mahindra


     Tech Mahindra will aim to almost double the Turnover to $5 billion by 2015 with
    focus on telecom, manufacturing and BFSI(Banking, Financial services, Insurance).
     The merged entity has a combined workforce of 84,000, including 36,000 in the
    erstwhile mahindra Satyam and 40,000 in Tech Mahindra.
     Tech Mahindra now focuses on four segments-telecom, manufacturing, Healthcare
    and retail.

     Conclusions
     More scandals like Satyam can be avoided if –
     If auditing firm is honest.
     SEBI plays an active role.
     Periodic review of legal compliance reports by independent directors.

    Enrolment No. 180500116020 Page 4

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