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Dhirajlal P. Nakum
Reg. No. – 520849649
Maunik G. Shah
Reg. No. –520841222
MBA 3 rd Finance

Roll No:


The practical training is given in M.B.A is to develop the Students

ability and knowledge about the finance concept and Environment. The
theatrical knowledge and conceptual ideas are the back ground of the
development and the practical training.
I have to say that internship training is a great opportunity which I had
taken to do something in practically.
We done the internship training in money multiplier (Vadodara Stock
Exchange) located at Baroda. For this internship we can know that the primary
of stock market
Practical knowledge is very inevitable for manager of tomorrow. It opens
the corporate work and provides technical knowledge.
As a student of this institute I am required to prepare a project report on
my internship training. It consists of my internship training in the money
multiplier .I proudly present my practical knowledge through this report.
I am pleased to submit the finding of the project report for the purpose of
evaluation by examiner. I also express that this internship training was
important for me because by this internship training I got the practical study of
the management.

We are thankful to our dean Mr. Sunil Dalwadi for providing us

opportunity to prepare this report.
We are really thankful to our professor in charge Mrs. Shweta Sharma
without guidance this report would be a dream. We are also thankful to Mr.
Rahul sir for helping in analysis of this report.
We also want to thank and express our gratitude towards all the people
who have helped us in this report.
The kindness and co-operation of all our friends are there who have
directly or indirectly contributed to this report.

Dhiraj P. Nakum

Maunik G. Shah

This is to certify that the summer project titled “Stock

option & Valuation of satyam computer Ltd. And Infosys
limited” is a bonafide and a sincere work of Mr. Dhiraj P.
Nakum and Maunik G. Shah is original and has been made
under my supervision in partial fulfillment of the award of MBA
programme in for the period from 26th nov-09, to 2nd jan-10. I
am pleased to say that his performance during this period was

Dhrumesh G. Shah
Money Multiplier
(Vadodara Stock Exchange)

Baroda Institute of Management

This is to certify that Project Report entitled:

“Stock option and Valuation of Satyam computer Ltd. &

Infosys Limited”

Is submitted in partial fulfillment of the requirements for the

degree of

Masters of Business Administration (MBA)

By : Dhiraj P. Nakum and Maunik G. Shah

Registration no. : _520849649 , 520841222

Semester : MBA 3rd Sem Specialization: Finance

The degree awarded is approved by UGC, Ministry of HRD, DEC

and AIU.

It is to further certify that he/she has worked under my


and Guidance and that no part of this report has been

submitted for
the Award of any other degree, Diploma, Fellowship or other
similar titles

or prizes and that the work has not been published in

any Journal

or Magazine.

Certified by:

(Guide’s Name & Qualification)

Ms. Shweta Sharma Mr.

Umesh Pandya

Faculty-Finance Vice-

MBA (Finance), UGC-NET (Mgt.)

NCFM-Depository Operations, AMFI



The history of the money multiplier ( Vadodara Stock Exchange) is very

interesting. It is one of the famous investments company in vadodara stock
Geographically this company is located in Vadodara. This company is do
online trading in BSE and NSE. This company has been set up in the year
2005.the company was local management in 2005 by Dhrumesh G. Shah. The
money multiplier pvt. Ltd. In the Vadodara Stock Exchange.
This company is also continuosly improve services and excellence in the
online trading.
Profile of the company
• Money multiplier ( Vadodara Stock Exchange )

• Investments

503,fortune tower
Vadodara – 39005

Land mark
• Near M.S.University



Contact person (owner)

Dhrumesh G. shah

• Mutual Fund Investment
• Stock and Shares
• Tax Savings Investment
• NSC/PPF Investment
• Fixed Deposit
Related Services
• Insurances
• Loans
• Accounts
Subsidiary Companies
• Charted Financial Services pvt. Ltd.
• Fullerton India
• Mascot Finance Services
• S. G. Kini & Co.
• Smart Money Inc.
Search By Keyword
• Stock Market Investment
• Tax Savings Plans
• BSE Share Brokers
• Buying Shares
• Chit Fund Business
• Financial Sector

The Finance Department is responsible for providing the following

• Implementing and monitoring financial controls to safeguard the City’s
monetary assets.
• Making payments to employees and vendors in a timely and accurate
• Safeguarding and dispensing financials information to appropriate
• Forecasting and auditing revenue.
• Preparing the budget.
• Safeguarding and tracking the City’s infrastructure and capital assets.
• Purchasing, contract writing and bidding services for each department.
• Implementation of the City’s Geographic Information System’s programs
• Reservations of the City’s building and park facilities and Dumpster
• Control over the shared fleet vehicles
The Payroll section is responsible for ensuring that all employees are
correctly paid, payroll information is accurate, and that federal and state
income tax withholdings are properly accounted for and paid. Retirement
payments and special services such as flex benefits, deferred
compensation and court ordered withholdings are also administered by
The Accounting/Treasury section monitors and estimates revenues on a
monthly basis to ensure that the City meets its projected revenues for the
current year. The Accounting/Treasury section also resolves general
ledger issues and coordinates with other departments to ensure that
expenditures and revenues are properly accounted and entered into the
financial system.
The Financial Reporting section is responsible for providing reports to
each City department and to outside parties to ensure legal compliance
with federal and state requirements. The Financial Reporting section also
reconciles the accounts of the City and works with the City Treasurer to
ensure that the revenue of the City is properly receipted.

The Revenue Auditing and Forecasting section works with each

department that has revenue centers to project current year’s revenues
and estimate future years’ revenues. This section audits revenue from
various sources to ensure that state agencies are providing revenue due
the City.
The Purchasing section ensures that the City’s assets are protected,
acquired and disposed of according to state and local requirements. Some
of the main functions of this section are the consolidation of supply
acquisition to maximize cost savings and the drafting of contracts and
requests for proposals to ensure that the City is protected and aggressive
in the construction and maintenance of infrastructure and services.
The Financial Administration section ensures that financial controls,
policies and procedures of the City are up-to-date and in compliance with
federal, state and local guidelines. This section is responsible for the
administration of sister agencies to the City such as the Redevelopment
Agency of Draper City and the Draper City Municipal Building
Authority. All special service districts are reported by this section as well
as budget and audit reports to other governmental agencies.
The Receptionist section ensures that the public is greeted and assisted in
a professional courteous manner. This section is responsible for the
reservation and operation of the City’s Dumpster program, the use of the
shared fleet vehicles and the building and park reservations. All visitors
and users of government services interact with the receptionist section.
Each department can utilize the receptionist section for coordination of
special requests and assistance with extraordinary events.

• Stock Market Index

➢ Sensex
➢ Nifty
















Stock market index

An index is statically indicator providing a representation of the value of the

securities which constitute it. Indexes often serve as barometers for a given
market or industry and benchmarks against which financial or economic
performance is measured. A stock index reflects the price movement of shares
while a bond index captures the manner in which bond prices go up and down.
For more than hundred years, people have tracked the market’s daily ups and
down using various indices of overall market performance. There are currently
thousands of indices calculated by various information providers.


Sensex is the stock market index for BSE. It was first compiled in
1986. It is made of 30 stocks representing a sample of large, liquid
and representative companies. The base year of SENSEX is 1978-
79 and the base value is 100.

Nifty is the stock market index for NSE. S&P CNX Nifty is a 50
stock index accounting for 23 sectors of the economy. The base
period selected for Nifty is the close of prices on November 3,
1995, which marked the completion of one year of operations of
NSE’s capital segment. The base Value of Index was set at 1000.
Research methodology

Rational of the research study

The study was undertaken to identify, understand, interpret and report
people’s attitude and daily trading.

Objective of research study

a. To identify trading habits of respondents
b. To understand their difficulties and basic facilities that is required in
stock exchange which increase their curiosity.
c. To understand their interest area in stock market

Scope of study
This study was aimed to explore the habit of trading, their difficulty and their
interest in the stock market of trading.

Research Design

Source of information
Primary data : primary data would be collected from 6 different areas of
Baroda city.
Secondary information is collected from internet and news paper articles
Sampling method
Quota sampling method was used to collect the data. We were asked to contact
1000 respondent and conduct interview with help of questionnaire.

Sampling media
The primary data will be collected with the help of personal interview
from the selected respondent.

Sampling size
We have tried to survey total 1000 respondents from different areas of
Baroda city.

Significance of the study

Basically it will help the student in getting the research based knowledge.
The study is very helpful to know the habits and interests of trading and their
trading of interest in stock market. So it may be helpful to different parties who
are directly or indirectly connected with such business. It can be beneficial to
stock exchange in understanding clients need for trading facilities.
Definition of the stock option

An employee stock option is the right granted by an employer to buy, or

"exercise" a given number of shares of company stock at a predetermined price,
which is known as the "grant," "share," or "exercise" price. The option is open
over a set period of time, known as the "exercise period." The "strike" price is
usually the market value of the shares at the time the option is offered, but this
is not always true. The profit for employees is realized if they can sell the stock
for more than they paid during the "exercise" period.
An option in which the underlie is the common stock of a corporation,
giving the holder the right to buy or sell its stock, at a specified price, by a
specific date. Also called equity option. The right, but not the obligation, to buy
(for a call option) or sell (for a put option) a specific amount of a given stock,
commodity, currency, index, or debt, at a specified price (the strike price)
during a specified period of time.
An option, as a call or put, to buy or sell stock at a specified price within a
specified time, specif., and such an option offered to an employee by a company
to buy its stock for less than the market price so called option contract.
Types of the stock option
Non-qualified Stock Options
• For broad-based plans, non-qualified stock options are usually the choice
available. With non-qualified stock options, the employee owes no tax
when the option is granted. Tax liabilities only occur on the difference, or
"spread," between the grant price and the stock's market value when the
shares are purchased, or "exercised." If the stock is held for less than a
year, the spread is taxed as ordinary income. If it is held for a year or
longer, the spread is taxed at the rate of capital gains, which is generally
lower. Companies deduct the spread as a compensation expense.
Qualified Stock Options
• Qualified stock options are also known as incentive stock options. With
qualified, or incentive, stock options, no taxes are charged during the
"grant" or the "exercise" period. Taxes are deferred until the stock is sold,
and taxes are imposed at the rate for capital gains, provided the stock is
sold at least two years after the "grant" period and at least one year after
the option is "exercised." If the stock is sold before the required period
for tax deferment, the sale is called a "disqualifying disposition" and
taxes are imposed at the higher individual tax rate. Qualified stock
options are usually reserved for top-level employees because companies
receive no tax benefits from them.
Exercising the Option
• There are three ways of "exercising" a stock option. The most common
way is to pay cash for the stocks. A second means is called a "stock
swap" which allows employees to trade stocks in the company they may
already own to pay for the "exercise" of the option. The third option is
called a "cashless exercise" where employees borrow the money to buy
the stock from a stockbroker and simultaneously sell enough other stock
they own to cover the price of the "exercise" plus any transaction fees.

• When the market is volatile, a company may change the price of the
option to reflect the present state of the market. This is done by canceling
the original option and offering a new option to employees, usually at a
lower price. Outside investors are not eligible for this, however. Non-
qualified options are transferable to children and even to charities.
Qualified stock options may not be transferred. Additionally, no more
than $100,000 in qualified stock options may be "exercised" in a single
• A stock option is a contract that gives the buyer the right to buy or sell
stock at a particular price on or before a certain expiration date, however
there is no obligation to do so. If you let the expiration date pass, the
option becomes worthless, but you're only out the premium paid. Here is
a look at the different types of stock options and how they work.

Call Option

• a call option gives the buyer the option to purchase an agreed quantity of
a particular stock from the seller on or before an expiration date at a
certain price, known as the strike price. The seller has to sell the stock if
the buyer wants it by the expiration date. The buyer pays a fee (called a

• The buyer benefits when the stock is moving up, bringing its value above
the strike price. The option is then said to be 'In the Money.' On or before
the expiration date, the buyer acquires the stock at the strike price and
makes a profit by selling it. If the stock ends up lower than the strike
price, the buyer is not under the obligation to buy.

• Call options are profitable when the market is booming.

Put Option

• a put option is a contract that allows you to sell stock at a particular

price (strike price) on or before an expiration date. The seller pays a
premium to buy a put option.
• If the value of the stock falls and is lower than the strike price, you
can buy the stock at the market price and make a profit because you
can sell at the higher strike price. If the value of the stock rises, you
are not under the obligation to sell the stock at the expiration date, and
what you lose is the premium you have paid.

• Put options are profitable for the seller when the market is in decline.

• If you are selling a put option to somebody who holds stock, you are
known as a "writer." The writer is someone who is bullish on the
market and collects a premium. If the stock's value increases, the
writer gains as the seller of the stock will not be inclined to sell it at
the strike price, when the market value is higher. The premium is the
writer's maximum gain, and having the option expire is the best case

• Leaps

• LEAPS or Long-Term Equity Anticipation Securities are options that

expire much further in the future and typically have more than one year
left before the expiration date.
• The premiums for LEAPS are higher than for standard put or call options
for the same stock. That's because the long duration before the expiration
date gives the stock more time to make a substantial move and for the
investor to make a healthy profit.

LEAPS allow the holder to keep track of the long-term price movement
without the need to invest the larger amount of capital that would be
required to own the stock outright. LEAPS can be exercised at any time
before expiration.

Employee Stock Options

• an employee stock option is a call option on a company's stock, issued to

employees as a form of non-cash compensation. You get the right to buy
a certain number of shares of your employer's stock at a specified price
over a certain period of time. The company is under the obligation to sell
the agreed stock to the employee at the strike price by the expiration date.
This is an incentive to employees to work toward boosting the company's
stock price above the strike price.
• Typically restrictions are imposed such as vesting and limited
transferability. Vesting rules specify how long employees should be part
of the company before the benefits become irrevocable.

• Employee stock options should not be confused with employee stock

ownership plans or ESOPs.
• Even seasoned startup personnel frequently misunderstand the ins and
outs of their options. I initially thought I could cram a full overview into
one post, but quickly realized that it would take several posts to get into
the detail that I wanted. So, this is the first post in the Startup Stock
Options series. These posts are intended for employees and other people
that own startup stock options. Brad Fled has a great series on Term
Sheets which cover stock options (and plenty of other issues) that are
more geared for company founders.
• Over the course of this series, I’ll touch on (in no particular order):
• How options are granted
• Vesting schedules
• Liquidation events
• Buyback rights
• Option prices & how they are set
• Early Exercise
• Multiple grants
• Reprising & Dilution
• Alternative Minimum Tax Impacts

The two types of options:

• The first aspect I’ll discuss is the two option types: Incentive Stock
Options (ISOs, sometimes called Statutory or Qualified Options) and
Nonqualified Stock Options (NSOs, NQSOs or sometimes called
Nonquals). Many aspects of stock options are impacted by which type
you hold so developing this familiarity early will help discussions later
on. I’m not going to address Employee Stock Purchase Programs
(ESPPs), as they are inappropriate for and rarely seen at startups. For a
super-detailed look at the two options visit this write-up by Johnson &
Berenson LLP.
• Most option agreements will state which type of option you hold. All
ISOs need to be issued under an ISO Agreement, which pretty much
ensures that the agreement is named something like “Incentive Stock
Option Agreement”. I’ve never seen an ISO Agreement that wasn’t
named that way, but I’m not familiar enough with the legal aspects to
guarantee this is always the case. The easiest way to find out if you hold
ISOs or NSOs is to ask your employer.
Incentive Stock Options
Incentive Stock Options are a class of options created by the IRS that
provide tax advantages over NSOs. These tax advantages are two-fold:
• ISOs are taxed on the stock sale (not the grant or exercise). NSOs are
taxed on the exercise of the option. You don’t make money until you sell
the stock. There can often be gaps between the time you exercise the
option (buy the stock), and sell the stock. There are plenty of scenarios
where you may exercise the option, but never have the opportunity to sell
it. This benefit prevents the worst-case NSO scenario from happening:
your unsold, exercised stock becomes worthless. You’ve lost the money
you paid to exercise the option, and you would also have to pay the IRS
ordinary income taxes on the difference between the exercise price you
paid and the market value of the option. So, if you paid $100 to exercise
stock worth $1000, you could have to pay the IRS up to 35% of the $900
• ISO shares may receive long-term capital gain tax treatment. If they
have been held long enough to satisfy a special holding period ISO stocks
can be taxed at lower long-term capital gains tax rates. Long-term capital
gains are currently 15%. Ordinary income tax rates can go up to 35%.
• It is also worth noting that the Alternative Minimum Tax is increasingly
reducing the tax benefits of ISOs. But more on this in a later post.
• There are multiple eligibility requirements for an ISO option. The notable
requirements include (but aren’t limited to):
• Employees only
• Must be granted at fair market value (409A hell for companies)
• Non-transferable (except through inheritance)
• Must be granted within 10 years of shareholder/board approval
• Must be exercised within 10 years of grant
Nonqualified Stock Options
• Any option that does not ‘qualify’ to meet the requirements of an ISO or
ESPP is an NSO (hence their nickname: ‘Nonquals’). NSOs are far more
flexible than ISOs, but several important differences include:
• Can be given to anyone (partners, consultants, board members, gas
station attendants, etc.)
• Can be priced below (or above) current market value
• Typically taxed on exercise at ordinary income tax rates. In some
instances, they can be taxed at issuance.
• ISOs offer tax advantages, but NSOs offer substantial flexibility.
Consequently, many startups issue both ISO and NSO options depending
on the situation. As an employee, in most cases you would prefer to
receive ISO instead of NSO options.
• A put option (sometimes simply called a "put") is a financial contract
between two parties, the seller (writer) and the buyer of the option. The
buyer acquires a short position with the right, but not the obligation, to
sell the underlying instrument at an agreed-upon price (the strike price).
If the buyer exercises his right to sell the option, the seller is obliged to
buy it at the strike price. In exchange for having this option, the buyer
pays the writer a fee (the option premium). The terms for exercising the
option's right to sell it differs depending on option style. A European put
option allows the holder to exercise the put option for a short period of
time right before expiration, while an American put option allows
exercise at any time before expiration.
• The most widely-traded put options are on equities, but they are traded on
many other instruments such as interest rates (see interest rate floor) or
• The put buyer either believes that the underlying asset's price will fall by
the exercise date or hopes to protect a long position in it. The advantage
of buying a put over short selling the asset is that the option owner's risk
of loss is limited to the premium paid for it, whereas the asset short
seller's risk of loss is unlimited (its price can rise greatly, theoretically,
infinitely, all the short seller's loss. The put buyer's prospect (risk) of gain
is limited to the option's strike price less the underling’s spot price and
the premium/fee paid for it.
• The put writer believes that the underlying security's price will rise, not
fall. The writer sells the put to collect the premium. The put writer's total
potential loss is limited to the put's strike price less the spot and premium
already received. Puts can be used also to limit the writer's portfolio risk
and may be part of an option spread.
• A naked put, also called an uncovered put, is a put option whose writer
(the seller) does not have a position in the underlying stock or other
instrument. This strategy is best used by investors who want to
accumulate a position in the underlying stock, but only if the price is low
enough. If the buyer fails to sell the shares, then the seller keeps the
option premium as a 'gift' for playing the game.
• If the underlying stock's market price is below the option's strike price
when expiration arrives, the option owner (buyer) can exercise the put
option, forcing the writer to buy the underlying stock at the strike price.
That allows the exerciser (buyer) to profit from the difference between
the stock's market price and the option's strike price. But if the stock's
market price is above the option's strike price at the end of expiration day,
the option expires worthless, and the owner's loss is limited to the
premium (fee) paid for it (the writer's profit).
• The seller's potential loss on a naked put can be substantial. If the stock
falls all the way to zero (bankruptcy), his loss is equal to the strike price
(at which he must buy the stock to cover the option) minus the premium
[(market price)] received. The potential upside is the premium received
when selling the option: if the stock price is above the strike price at
expiration, the option seller keeps the premium, and the option expires
worthless. During the option's lifetime, if the stock moves lower, the
option's premium may increase (depending on how far the stock falls and
how much time passes). If it does, it becomes more costly to close the
position (repurchase the put, sold earlier), resulting in a loss. If the stock
price completely collapses before the put position is closed, the put writer
potentially can face catastrophic loss.
Call Option
• Definition:
A call option is an option contract in which the holder (buyer) has the
right (but not the obligation) to buy a specified quantity of a security at a
specified price (strike price) within a fixed period of time (until its
• For the writer (seller) of a call option, it represents an obligation to sell
the underlying security at the strike price if the option is exercised. The
call option writer is paid a premium for taking on the risk associated
with the obligation.
Buying Call Options
• Call buying is the simplest way of trading call options. Novice traders
often start off trading options by buying calls, not only because of its
simplicity but also due to the large ROI generated from successful trades.
• A Simplified Example
• Suppose the stock of XYZ Company is trading at $40. A call option
contract with a strike price of $40 expiring in a month's time is being
priced at $2. You strongly believe that XYZ stock will rise sharply in the
coming weeks after their earnings report. So you paid $200 to purchase a
single $40 XYZ call option covering 100 shares.

• Say you were spot on and the price of XYZ stock rallies to $50 after the
company reported strong earnings and raised its earnings guidance for the
next quarter. With this sharp rise in the underlying stock price, your call
buying strategy will net you a profit of $800.
• Let us take a look at how we obtain this figure.
• If you were to exercise your call option after the earnings report, you
invoke your right to buy 100 shares of XYZ stock at $40 each and can
sell them immediately in the open market for $50 a share. This gives you
a profit of $10 per share. As each call option contract covers 100 shares,
the total amount you will receive from the exercise is $1000.
• Since you had paid $200 to purchase the call option, your net profit for
the entire trade is $800. It is also interesting to note that in this scenario,
the call buying strategy's ROI of 400% is very much higher than the 25%
ROI achieved if you were to purchase the stock itself.

Selling Call Options

• Instead of purchasing call options, one can also sell (write) them for a
profit. Call option writers, also known as sellers, sell call options with the
hope that they expire worthless so that they can pocket the premiums.
Selling calls, or short call, involves more risk but can also be very
profitable when done properly. One can sell covered calls or naked
(uncovered) calls.
Covered Calls
• The short call is covered if the call option writer owns the obligated
quantity of the underlying security. The covered call is a popular option
strategy that enables the stockowner to generate additional income from
their stock holdings thru periodic selling of call options. See our covered
call strategy article for more details.
Naked (Uncovered) Calls
• When the option trader writes calls without owning the obligated holding
of the underlying security, he is shorting the calls naked. Naked short
selling of calls is a highly risky option strategy and is not recommended
for the novice trader. See our naked call article to learn more about this
Call Spreads
• A call spread is an options strategy in which equal number of call option
contracts are bought and sold simultaneously on the same underlying
security but with different strike prices and/or expiration dates. Call
spreads limit the option trader's maximum loss at the expense of capping
his potential profit at the same time.
• Call option. Buying a call option gives you, as owner, the right to buy a
fixed quantity of the underlying product at a specified price, called the
strike price, within a specified time period.
• For example, you might purchase a call option on 100 shares of a stock if
you expect the stock price to increase but prefer not to tie up your
investment principal by investing in the stock. If the price of the stock
does go up, the call option will increase in value.
• You might choose to sell your option at a profit or exercise the option and
buy the shares at the strike price. But if the stock price at expiration is
less than the strike price, the option will be worthless. The amount you
lose, in that case, is the premium you paid to buy the option plus any
brokerage fees.
• In contrast, you can sell a call option, which is known as writing a call.
That gives the buyer the right to buy the underlying investment from you
at the strike price before the option expires. If you write a call, you are
obliged to sell if the option is exercised and you are assigned to meet the
Definition of stock valuation
The process of calculating the fair market value of a stock by using
predetermined formulas that factors in various economic indicators. Stock
valuation can be calculated using a number of different methods. The most
common methods used are the discounted cash flow method, the P/E method,
and the Gordon model. Whichever method is chosen must be done accurately so
that the price of stock can be valued properly.

Approximate valuation approaches

Average growth approximation: Assuming that two stocks have the same
earnings growth, the one with a lower P/E is a better value. The P/E method is
perhaps the most commonly used valuation method in the stock brokerage
industry.] By using comparison firms, a target price/earnings (or P/E) ratio is
selected for the company, and then the future earnings of the company are
estimated. The valuation's fair price is simply estimated earnings times target
P/E. This model is essentially the same model as Gordon's model, if k-g is
estimated as the dividend payout ratio (D/E) divided by the target P/E ratio.
Constant growth approximation: The Gordon model or Gordon's growth model is the best
known of a class of discounted dividend models. It assumes that dividends will increase at a
constant growth rate (less than the discount rate) forever. The valuation is given by the

and the following table defines each symbol:

Meaning Units

$ or € or
estimated stock price

$ or € or
last dividend paid

discount rate %

the growth rate of the

Stock Valuation based on Earnings
Stock valuation based on earnings starts out with one giant logical
leap: you assume that each dollar of earnings per share of a
company is really worth one actual dollar of income to you as a
stockholder. This is theoretically because you expect the company to
use that dollar in a beneficial way: for example, they could use it to
pay you a dividend; or they could invest it in their own growth, which
would cause future earnings to be even greater.

You also generally assume that the company will go through several distinct phases,
starting with a "growth" phase where earnings are increasing at a predictable rate,
followed by a "mature" phase where earnings level off to a constant level.
To find the value of a stock, you need to calculate all of these future earnings (out to
infinity!), and then use your own desired rate of return as a discount rate to find their
present value. The infinite sum of these present values is the fair market value of the
stock; or more accurately, it's the maximum price you should be willing to pay.

(The current fair market value is equal to the sum of the heights of all of the green
bars, which are the present values of the corresponding blue bars.To get the formula,
we'll define some variables:

We're assuming that earnings will start to grow for N years, and then level off:
Year Earnings

1 E(1 + G)

2 E(1 + G)2

N E(1 + G)N

N+1 E(1 + G)N

N+2 E(1 + G)N

Now we'll write R for our desired rate of return, and use it to find the present
values of all of these earnings:
Year Present Value of Earnings

1 E(1 + G)/(1 + R)

2 E(1 + G)2/(1 + R)2

N E(1 + G)N/(1 + R)N

N + 1 E(1 + G)N/(1 + R)N+1

N + 2 E(1 + G)N/(1 + R)N+2

What we've got here is two geometric series; one going from 1 to N, and the
other going from N + 1 to infinity. The result is basically too ugly to bother
writing out; it's more sensible just to use the formula for the geometric series in
a spreadsheet or computer program. When people do write it out, they usually
write it this way:
P = E1Q + E2Q2 + ... + ENQN + ENQN x Q/(1 - Q)

Where E2 is the earnings in year 2 (or whatever) and Q is the so-called

"discount factor" 1/(1 + R).
Zero-Growth Case
One special case is actually interesting to write out though. If you assume that
the stock is already in the "mature", zero-growth years -- ie, that N is zero -- the
geometric series formula will simplify to:
P = E/R

or, equivalently,

So if you take a desired return of 11%, you find that the theoretical "fair" P/E
ratio of the zero-growth stock is 1/.11 = 9.09, which sounds reasonable.
Constant-Growth Case
A second special case that people use is the "constant growth forever" case,
meaning N is infinity. The formula in this case simplifies to
P = E1 / (R - G)

Where E1 is earnings over the next 12 months.

This approach can be dangerous. Constant growth forever means the company
is going to get infinitely big, which is a hard concept to fit into a common sense
understanding of valuation. The formula will give you a number as long as the
growth rate G is less than the discount rate R; but you can force it to give you a
ridiculously huge number if you make G very close to R. This graph won't let
you try that - the blue bars could blow through the top of your screen and hurt
somebody - but you can see it happen in the discounted cash flows calculator in
the stock valuation article.
Types of stock valuation

Stocks have two types of valuations. One is a value created using some
type of cash flow, sales or fundamental earnings analysis. The other value
is dictated by how much an investor is willing to pay for a particular
share of stock and by how much other investors are willing to sell a stock
for (in other words, by supply and demand). Both of these values change
over time as investors change the way they analyze stocks and as they
become more or less confident in the future of stocks. Let me discuss
both types of valuations.
Earnings per Share (EPS). You've heard the term many times, but do
you really know what it means. EPS is the total net income of the
company divided by the number of shares outstanding. It sounds simple
but unfortunately it gets quite a bit more complicated. Companies
usually report many EPS numbers. They usually have a GAAP EPS
number (which means that it is computed using all of mutually agreed
upon accounting rules) and a Pro Forma EPS figure (which means that
they have adjusted the income to exclude any one time items as well as
some non-cash items like amortization of goodwill or stock option
expenses). The most important thing to look for in the EPS figure is the
overall quality of earnings. Make sure the company is not trying to
manipulate their EPS numbers to make it look like they are more
profitable. Also, look at the growth in EPS over the past several
quarters / years to understand how volatile their EPS is, and to see if they
are an underachiever or an overachiever. In other words, have they
consistently beaten expectations or are they constantly restating and
lowering their forecasts?
Price to Earnings (P/E). Now that you have several EPS figures
(historical and forecasts), you'll be able to look at the most common
valuation technique used by analysts, the price to earnings ratio, or P/E.
To compute this figure, take the stock price and divide it by the annual
EPS figure. For example, if the stock is trading at $10 and the EPS is
$0.50, the P/E is 20 times. To get a good feeling of what P/E multiple a
stock trades at, be sure to look at the historical and forward ratios.
Growth Rate. Valuations rely very heavily on the expected growth rate
of a company. For starters, you can look at the historical growth rate of
both sales and income to get a feeling for what type of future growth that
you can expect. However, companies are constantly changing, as well as
the economy, so don't rely on historical growth rates to predict the future,
but instead use them as a guideline for what future growth could look like
if similar circumstances are encountered by the company. To calculate
your future growth rate, you'll need to do your own investment research.
The easiest way to arrive at this forecast is to listen to the company's
quarterly conference call, or if it has already happened, then read a press
release or other company article that discusses the company's growth
guidance. However, remember that although company's are in the best
position to forecast their own growth, they are not very accurate, and
things change rapidly in the economy and in their industry. So before
you forecast a growth rate, try to take all of these factors into account.
• They may have been growing earnings at 10 - 15% over the past several
quarters / years because of cost cutting, but their sales growth could be
only 0 - 5%. This would signal that their earnings growth will probably
slow when the cost cutting has fully taken effect. Therefore you would
want to forecast earnings growth closer to the 0 - 5% rate than the 15 -
PEG Ratio. This valuation technique has really become popular over the
past decade or so. It is better than just looking at a P/E because it takes
three factors into account; the price, earnings, and earnings growth rates.
To compute the PEG ratio (a.k.a. Price Earnings to Growth ratio) divide
the Forward P/E by the expected earnings growth rate (you can also use
historical P/E and historical growth rate to see where it's traded in the
past). This will yield a ratio that is usually expressed as a percentage.
The theory goes that as the percentage rises over 100% the stock becomes
more and more overvalued, and as the PEG ratio falls below 100% the
stock becomes more and more undervalued. The theory is based on a
belief that P/E ratios should approximate the long-term growth rate of a
company's earnings. Whether or not this is true will never be proven and
the theory is therefore just a rule of thumb to use in the overall valuation
Return on Invested Capital (ROIC). This valuation technique measures
how much money the company makes each year per dollar of invested
capital. Invested Capital is the amount of money invested in the company
by both stockholders and debtors. The ratio is expressed as a percent and
you should look for a percent that approximates the level of growth that
you expect. In it's simplest definition, this ratio measures the investment
return that management is able to get for its capital. The higher the
number, the better the return.
Return on Assets (ROA). Similar to ROIC, ROA, expressed as a
percent, measures the company's ability to make money from its assets.
To measure the ROA, take the pro forma net income divided by the total
assets. However, because of very common irregularities in balance
sheets (due to things like Goodwill, write-offs, discontinuations, etc.) this
ratio is not always a good indicator of the company's potential.
Price to Sales (P/S). This figure is useful because it compares the
current stock price to the annual sales. In other words, it tells you how
much the stock costs per dollar of sales earned. To compute it, take the
current stock price divided by the annual sales per share. The annual
sales per share should be calculated by taking the net sales for the last
four quarters divided by the fully diluted shares outstanding (both of
these figures can be found by looking at the press releases or quarterly
reports). The price to sales ratio is useful, but it does not take into
account any debt the company has. For example, if a company is heavily
financed by debt instead of equity, then the sales per share will seem high
(the P/S will be lower). All things equal, a lower P/S ratio is better.
However, this ratio is best looked at when comparing more than one
Market Cap. Market Cap, which is short for Market Capitalization, is
the value of all of the company's stock. To measure it, multiply the
current stock price by the fully diluted shares outstanding. Remember,
the market cap is only the value of the stock. To get a more complete
picture, you'll want to look at the Enterprise Value.
Enterprise Value (EV). Enterprise Value is equal to the total value of
the company, as it is trading for on the stock market. To compute it, add
the market cap (see above) and the total net debt of the company. The
total net debt is equal to total long and short term debt plus accounts
payable, minus accounts receivable, minus cash. The Enterprise Value is
the best approximation of what a company is worth at any point in time
because it takes into account the actual stock price instead of balance
sheet prices. When analysts say that a company is a "billion dollar"
company, they are often referring to it's total enterprise value. Enterprise
Value fluctuates rapidly based on stock price changes.
EV to Sales. This ratio measures the total company value as compared to
its annual sales. A high ratio means that the company's value is much
more than its sales. To compute it, divide the EV by the net sales for the
last four quarters. This ratio is especially useful when valuing companies
that do not have earnings, or that are going through unusually rough
times. For example, if a company is facing restructuring and it is
currently losing money, then the P/E ratio would be irrelevant. However,
by applying a EV to Sales ratio, you could compute what that company
could trade for when it's restructuring is over and its earnings are back to
EBITDA. EBITDA stands for earnings before interest, taxes,
depreciation and amortization. It is one of the best measures of a
company's cash flow and is used for valuing both public and
private companies. income statement, take the net income and
then add back interest, taxes, depreciation,
Valuing Stock Options and Other Equity Based Compensation
• Appraisal Economics can value stock options and other equity based
compensation for various purposes, including:
✔ Financial reporting, principally under SFAS 123R
✔ Gift and estate tax valuations
✔ Other tax-related purposes
✔ We have extensive experience valuing all types of stock options and
equity based compensation, from simple call options to more complex
derivatives, including:
✔ Straight stock options
✔ Restricted stock
✔ Stock options with accreting exercise prices
✔ Profits units
✔ Outperformance units
✔ Contingent purchase price elements
We have valued instruments that are subject to vesting conditions
including earnings targets, share price targets, total return targets and, of
course, time-based vesting.
• We apply a wide range of valuation techniques, including:
✔ Closed form models such as Black-Scholars-Merton
✔ Lattice models, such as a binomial model
✔ Synthetic option modeling
✔ Monte Carlo simulations
• Valuing stock options and other types of equity based compensation has
become more important with the implementation of SFAS 123R.
Commencing in the first fiscal year subsequent to June 15, 2005, all
publicly traded companies are required to expense stock based
compensation in accordance with SFAS 123R.

• The Gordon's Growth Model or simply Gordon Model is the most

recognized model in the category of discounted dividend models. It
presumes that the dividends would grow at a fixed rate of growth
(lower in comparison to the discount rate) always. The valuation is
expressed with the help of the following formula:
P = D.? ((1+g)/ (1+k))i = D.((1+g)/(k-g)), where the summation takes
the value of I varying from 1 to ? (Infinity).
• Here, P refers to the estimated stock price and the units may be US$,
UK£, or € (Euro)
• D refers to the last dividend paid and the units may be US$, UK£, or €
• k refers to the discount rate and the unit is %
• g refers to the rate of growth of dividends and the unit is %
Potential price or market criteria
• According to the opinion of a number of people, if a share is registered
in a well managed share market and there are huge numbers of
transactions, the price that has been enlisted would be near the
calculated fair value. This is termed as efficient market hypothesis.

Therefore, furthermore to the basic economic standards, market standards

also should be taken into consideration for market based valuation. Valuation
of a share is not performed solely to calculate the fair value of the share, this
is also done for ascertaining the expected price range considering the market
conduct characteristics. One of the principal behavioral valuation devices is
stock image. This is basically a coefficient, which connects the market value
and fair value (theoretical).
history of the satyam computer

• 1987
➢ On 24th June Company was incorporated as a Private Limited Co. for
providing Software Development and Consultancy Services to large
corporations. The company was promoted by B Rama Raju and B
Ramalinga Raju. The company has set up two software Technology
Parks, one at Mayfair Centre, Secunderabad and other at Qutuballapur of
Ranga Reddy Dist. of A.P. The company also developed a software
Development center in Bangalore.
• 1991
➢ On 26th August it was converted into a Public Limited Company.
• 1992
➢ The Company went in for a Public Issue of Equity shares. The company
has set up facilities at Secunderabad, Hyderabad and Bangalore. The
Company has created infrastructural facilities consisting of workstations
with modern communication and networking equipment.
➢ Satyam went in for a public issue of equity shares with the main objective
of setting up a software technology park and a 100 percent export
oriented unit for software development with a dedicated 64 KBPS
satellite link.
• 1993
➢ During the year company has entered into a joint venture agreement with
Dun & Bradstreet Corp., U.S.A. for development of software’s.
• 1994
➢ On January 26th a joint venture company called Dun & Bradstreet
Satyam Software (P) Ltd. was incorporated.
• 1995
➢ During the year company issued 37,17,000 12% unsecured fully
convertible debentures part "A" of Rs.100 each on right basis for the
shareholders in proportion of 1 FCD for every 5 shares held. The
company also issued 37, 17,000-12% FCD's-part `B' Rs.60 per
debentures in August which can be converted into equity shares of Rs.10
each at premium of Rs.50 per share on August 1996.
• 1996
➢ During the year two offices were set up, one in USA and other in Japan.
And the company has added new business partners in Australia,
Canada, Japan and Europe.
➢ During the year company promoted 4 subsidiaries. Viz Stayam
Renaissance Consulting Ltd., Satyam Enterprise Solutions Pvt. Ltd.,
Stayam Info way Pvt. Ltd and Satyam Info way Pvt. Ltd.
• 1997
➢ During the year company has added additional space in Secunderabad
and Bangalore. And new software development centers were opened in
Hyderabad, Pune, Chennai and Bhubaneswar during the year. The
company has established a school at Indian Institute of Information
Technology at Hyderabad, joining a select band of global corporations
like IBM, Microsoft and oracle who are also participating in IIIT's
➢ Satyam Computer Services Ltd. (SCSL), the Hyderabad-based software
company, setting up three more new software development centers at
Chennai, Pune and Bhubaneswar.
➢ Satyam Info way (P) Ltd. (SIL), a subsidiary of Satyam Computers, has
signed an agreement with Sterling Commerce, International Group of the
U.S. to provide electronic data interchange (EDI) and other value
added electronic commerce solutions throughout India.
➢ Two new offices have already been set up in the US, and another in
Japan. New business partners have been added in Australia, Canada,
Japan and Europe.
➢ Satyam Info way is a 100 per cent subsidiary of the Hyderabad-based
software major, Satyam Computer Services Ltd.
➢ Dun & Bradstreet Corp. USA (D&B), is likely to buy out the 24 per
cent stake of joint venture partner Satyam Computers Services and gain
majority control, 76 per cent of the stake is held by D&B.
➢ The joint venture was set up to provide software services to D&B client’s
world wide. Dun and Bradstreet - Satyam Software is the largest single
location software unit for D&B in the world.
➢ Satyam Computer has four subsidiaries: Satyam Spark Solutions, Satyam
Info ways, Satyam enterprise Solutions and Satyam Renaissance,
Consulting, Spark solutions focuses on software products, Info ways
operates in the field of electronic commerce and electronic data
➢ Satyam Computer Services Ltd announced that it had divested its 24 per
cent ownership of Dun & Bradstreet Satyam Software Pvt. Ltd (DBSS)
in favor of Cognizant Software Solutions Corporation, a subsidiary of
Cognizant Corporation, US.
➢ Satyam Computer Services Ltd., has been selected by the Switzerland-
based World Economic Forum and World Link magazine as one of
India's most remarkable and rapidly growing entrepreneurial companies.
➢ The funds will be raised through a Rs 20 crore debt and the rest will be
provided by the parent company as equity in the subsidiary to set up the
nationwide network.

• 1998
➢ -Satyam Info way, a wholly-owned subsidiary of Satyam Computer
Services Ltd., has received the Technical Engineering Centre (TEC)
approval from the Department of Telecommunications (Dot) for
commercializing its operations.
➢ The company is a 100 percent EOU under the software technology park
scheme of the Department of Electronics, Government of India. It is
presently engaged in development and export of software to USA,
Canada, Sweden, Germany etc.
➢ Satyam Computer Services Ltd. opened its first overseas development
centre in New Jersey. The company proposes to set up seven such
development centers outside India, four of them in the US.
➢ Satyam Computer Services Ltd. has entered into an agreement with the
National Securities Depository Ltd. (NSDL) for providing its
shareholders with the facility of trading in the dematerialized form of
• 1999
➢ -The company is setting up offsite development centers which will have
high margin business and also ventured into the euro conversion business
which is slowly taking-off.
➢ Sataym Computer Services Ltd. will be setting up two offsite
development centers in addition to the existing seven centers across the
➢ Satyam Computer Services Ltd., one of the fastest growing IT companies
in the country, has taken significant decisions recently including the
merger of three of its subsidiaries with the parent company and a 1:1
bonus issue.
➢ The company has also set up India's first Indian Institute of Information
Technology and is the first software company in India to get accredited
by (SEI CMM) level 5 certificates.
➢ Satyam Info way Ltd, is the second largest Internet services provider in
India based on the number of customers.
• 2000
➢ -Vision-Compass Inc., the US-based wholly owned subsidiary of Satyam
Computer Services Ltd., announced the global launch of Vision
Compass, a collaborative enterprise management software product.
➢ The Company has entered into an agreement with Venture Global
Engineering LIC, USA, to set-up a 50:50 joint venture for the software
development of CAD/CAM/CAE at Hyderabad.
➢ The Company launched an organization-wide transformation training
program - Customer-Oriented Global Organization (COGO)
➢ The Company has announced its tie-up with Vignette Corporation of the
US for the implementation of e-business applications.
➢ Satyam Computer Services signed an equal joint venture with $6.3 bn US
networking company Computer Associates Inc (CA) to set up an
Application Service Provider (ASP) for small and medium enterprises.
➢ The Company and Texas-based Enterprise Inc, a major provider of
collaboration platform software for e-markets.
➢ Pepsi has entered its second cyberspace venture forging a tie-up with the
company and Hindustan Petroleum Corporation as the official beverages
supplier for their "Speed net project".
➢ SAS Institute India, a wholly owned subsidiary of the US-based SAS
Institute Inc., has tied up with the company as a SAS quality partner to
provide comprehensive data warehousing and data mining solutions to
various industry verticals.
➢ The Company has formed a strategic alliance with Microsoft Corporation
to provide Web and enterprise integration application deployment
solutions to US public sector customers utilizing Windows DNA 2000
➢ The Company and TRW Inc, the US-based $17 billion company, that
they have signed a letter of intent to form a strategic alliance wherein the
newly-formed joint venture would provide TRW and other global
companies both information systems and engineering services.
➢ The Company has signed an agreement with the US-based
edatafinder.com to build a comprehensive business intolerance e-market
site that will supply more than 200 types of business data online to
organizations around the globe.
➢ The Company has been named a 2000 Web Business 50/50 award
winner for SatyamWorld - its corporate intranet, to become the only
company to feature in this list.
➢ The Company has realized Rs 17012.53 lakes net of transaction costs and
tax through the sale of 347,2000 No. of equity shares of Satyam Info say
Ltd. to the Government of Singapore Investment Corporation Pvt. Ltd.
➢ The Company has signed a contract with Mercator, the IT subsidiary of
the UAE-based Emirates group, to provide product maintenance and
support activities for Mercator's products in the aviation industry.
➢ Satyam Computer Services inaugurated an offshore development centre
`Mercator Satyam Centre' - to exclusively handle projects for the $60
million Mercator, an IT subsidiary of the UAE based Emirates group.
➢ C Srinivas (Srini) Raju has resigned as the executive director of the
company with effective from September 1.
➢ Satyam Computer Services Ltd. and the US-based SEEC Inc have entered
into a strategic alliance to leverage the latter's tools and technology for
Sat yam’s worldwide e-business transformation practice.
➢ The Company has received the National HRD award - 2000 for
outstanding contributions to HRD.
➢ Satyam Computers is setting up a joint venture with the $17 billion TRW
Inc, a Fortune-100 Company in the US. - The Company has re
launched its shopping channel as www.sifymall.com, which would now
offer ` celebration of value' shopping.
➢ Prabhu Sinha, a senior vice-president of Satyam Computer Services,
received Qimpro Silver Award for 2000-01.
➢ Satyam Computer Services Ltd. and Arriba Inc., a leading business to
business e-commerce platform provider has entered into an alliance.
➢ Satyam Manufacturing Technology, a joint venture between Satyam
Computers Services and US-based TRW, has received a $200 million
contract from TRW.
➢ Mr. B. Ramalinga Raju, Chairman of Satyam Computer Services, has
been awarded the IT Man of the Year 2000 Award by Dataquest.
➢ Satyam Computer Services has acquired 23 acres in Bangalore to set up
a new software development centre.
• 2001
➢ The Company has entered into a long-term collaboration agreement with
Centre for Cellular and Molecular Biology, to jointly identify business
opportunities at the global level for IT-enabled services in bioinformatics
and related fields.
➢ The Company has entered into a partnership with i2Technolgies.
➢ Satyam Computer Services Ltd., the software services company based in
Hyderabad, is set to commission its new development centre in the Dubai
Internet City.
➢ The Company has been rated as one of the 10 well-regarded companies in
the country in prestigious 2000/2001 Review 2000 Survey conducted by
the Hong Kong-based Far Eastern Economic Review.
➢ Satyam Computer Services has become the first of the top Indian
software services companies to open its facility at Dubai Internet City.
➢ The Company has won the Frost & Sullivan market engineering award
for Competitive Strategy 2001 in the application service provider
category. - The American depositary shares (ADS) of Satyam Computer
Services on May 16 was listed at $11.16 on the New York Stock
Exchange (NYSE) at a premium of 14.9 per cent to the offer price.
➢ Satyam Computer Services has expanded its partnership with the US-
based Health axis Inc., a leading supplier of healthcare technology
solutions. Satyam has also agreed to become the primary integration
partner for deploying the Insur-Enroll solution. Satyam bagged a major
project from Health axis in the last quarter.
➢ Satyam Computer Services on August 27 announced a global strategic
alliance with SEEC Inc., a Pittsburgh-based leading provider of
component and web services solutions for insurance and other industries.
• 2002
➢ Satyam Computer Launches operations in China.
➢ Satyam Computer Services Ltd a leading global IT services firm, on
August 8, 2002 announced the signing of an agreement with Saint-
Gobain Abrasives, Inc a Massachusetts (USA) based corporation to
provide IT services.
➢ Satyam Computer Services Ltd has entered into a Premier Partnership
with Ireland-based IONAr, a leading e-Business Platform provider for
Web Services Integration, to deliver the Orbit E2A Web Services
Integration and Application Server Platforms.
➢ Nipuna Services Ltd, the BPO subsidiary of Satyam Computer Services
Ltd announced the appointment of Mrs. Ram Ramasundar as COO of
the company. Further the company has also appointed Venkaswamy
Nagendra as Chief Marketing Officer and M Satyanarayana as Chief
Marketing Officer of the company.
• 2003
➢ Jargon Technologies appoints Satyam Computer for State-of-the-Art
Enterprise Resource Planning Solution
➢ Embarks on an organizational and business transformation initiative
termed Orbit 5
➢ Giga Information Group includes Satyam Computer Services Ltd. as the
top choice for SAP support among offshore service providers
➢ World Bank gives outsourcing contract to Satyam Services
➢ Satyam and Ansys Inc Forge Global Strategic Alliance, Offer Process
Integrated Engineering Simulation Solutions
➢ Enters into strategic alliance with semiconductor major Texas
Instruments to provide consulting services for DSP (digital signal
processing) customers
➢ Satyam Computer & Correlate Technologies announce partnership to
provide Correlate K-Map solutions worldwide
➢ Sets up Offshore Solutions Center for TRW Automotive in Chennai
➢ Satyam, Hummingbird open ETL/BI competency centre in Singapore
➢ Satyam unveils Samanvay to create learning opportunities to staff
➢ Satyam & Microsoft sign MOU to provide world class IT outsourcing
services to Asia Pacific region
➢ Launches Global Solutions Centre in Malaysia
➢ Conducts first ever global customer summit (SatyamWorld) In San
Diego, California, USA
➢ Forms alliance with Yahoo, a leading portal and collaboration platform
provider, to deliver solutions centered on Yahoo! Portal and Messenger
➢ Bags 2003 Account Performance Award from Strategic Account
Management Association (SAMA) during its annual conference in
Orlando, Florida
➢ Implements SAP at Oman Trading Establishment
➢ Signs up a long term contract with World Bank
➢ Sat yam’s solution bags CSI National IT Award for best packaged
➢ Approves enhancement of investment limit by Foreign Institutional
Investors (FII's) under Portfolio Investment Scheme from 49% to 60%
➢ Commences a Student Administration System (SAS) solution
implementation for Singapore- based Universities 21 Global (U21G), a
leading online university initiative, offering on-line higher education to
students all over the world
➢ Sat yam’s advanced e-Logistic Solution System for Konsortium Logistic
Bhd Malaysia goes live
➢ Launches Offshore Development Center (ODC) in Bangalore to
provide high end product development support to Fujitsu Ltd., a leading
provider of customer focused IT and communication solution for the
global marketplace
➢ Develops a virtual facility in the 120-acre technology campus located in
➢ Warburg Pincus, a venture capital & equity fund, sells 2.6% Satyam
➢ Allotment of 11533 equity shares through circular resolution on
October 28, 2003 under stock option plans of the company.
➢ The company has developed a virtual facility in the 120-acre technology
campus located in Hyderabad. Satyam Live captures the soft
infrastructure, the products etc. of a knowledge driven company.
➢ The Compensation Committee of Directors of the company allotted 3507
equity shares
➢ Allotted 24271 equity shares through circular resolution on October 28,
2003 under stock option plans of the company.
➢ Company has signed a multi-year agreement with American International
Technology Enterprises, Inc.
➢ The company has sold 1m equity shares of Sify in a private placement
through Sify's sponsored ADR program.
➢ The company sells its Sify stake to Venture tech increasing venture tech's
stake to 16.8 per cent from 13.8 per cent.
➢ Satyam Computer Services honored with prestigious IBM Lotus award
➢ Satyam acquires Mega soft in stock deal
➢ Sat yam’s new development centre in Canada
➢ Fidelity Investments buys 245,500 equity shares of the company, stake
increases to 5.05%
➢ Signs a regional partnership with the Nasdaq-listed Actuate Corporation,
an enterprise reporting applications provider, to collaborate in the Asia
Pacific region. Following this move, the Satyam-Actuate Centre of
Excellence will be set up at Sat yam’s Global Solutions Centre in
Cyberjaya, Malaysia
• 2004
➢ Sat yam’s Nipuna appoints new CEO & COO
➢ Satyam Computer Services Ltd has entered into a tie-up with OAT
Systems Inc of the US to provide comprehensive radio frequency
identification devices (RFID)-based solutions to its customers across the
➢ IT major Satyam Computer Services Ltd (SCSL) has launched a unique
platform called 'Virtue' which will provide two-way communication
between the company and the selected candidates for employment
➢ Satyam Computer Services Limited on Saturday inaugurated the
company's ninth facility in Hyderabad
➢ Satyam launches its largest Global Development Center outside India at
Melbourne, Australia
➢ Satyam forges alliance with Cyclone Commerce
➢ Satyam Computer joins mainframe migration alliance (MMA)
• 2005
➢ Satyam ranked 3rd in Corporate Governance Survey by Global
Institutional Investors
➢ Satyam Computer launches ESA service offering on May 05, 2005.
➢ Satyam Computer joins Microsoft Insurance Initiative
➢ Satyam Computer enters into global alliance agreement with Meridian
➢ Satyam Computer launches business solutions laboratory, FUTURUS
➢ Satyam Computer announces partnership with Hungary's premier science
IT institute MTA SZTAKI
➢ announced a services and technology collaboration to offer supply chain
solutions to customers in the Asia Pacific region across industry verticals.
• 2006
➢ Satyam Computer launches Offshore Development Center for INVISTA
in Bangalore
➢ Satyam Computer Services Ltd on October 26, 2006 has announced that
it has achieved global certification in the ISO 9001 (quality
management), ISO 20000 (information technology service management
for Infrastructure Management Services and Network & Systems), and
ISO 27001 (Information Security Management) standards. With the
successful audit of the development center at Budapest, Hungary, all
three certifications were conferred at an organization-wide level.
• 2007
➢ Satyam Computer Services Ltd has on March 15, 2007 has announced
that it has implemented an organization-wide, virtual learning
environment called Satyam Learning World.
➢ Satyam Computer Services Ltd on June 04, 2007 has announced that it
recently won Computer Associates Vision, Impact, Progress (VIP) Award
for an internal implementation and optimization of CA's service desk
➢ Satyam Computer Services Ltd on June 11, 2007 has announced that it
has forged an alliance with US-based JDA Software Group Inc., the
leading provider of supply and demand chain solutions to 5,500 of the
world's top retailers, manufacturers, and suppliers.
• 2008
➢ Satyam Computer Services Ltd has informed that Satyam BPO, the
business process outsourcing arm of Satyam, a leading global business
and information technology services Company, on April 10, 2008
announced that it has won two prestigious Shared Services Excellence
awards from the International Quality and Productivity Council.
➢ Satyam Computer has announced it has inked a pact with Info spectrum
to give third-party maintenance, repair and overhaul (MRO) and
component repair services for the global aviation industry.
• 2009
➢ Tech Mahindra has announced the name change of scam hit Satyam
Computers as Mahindra Satyam. This rebranding exercise symbolizes an
amalgamation of the values of Mahindra Group with Sat yam’s fabled
expertise, even as it retains that part of Sat yam’s identity which signifies
commitment, purpose and proficiency of the organization and its people,
according to Anand Mahindra, vice-chairman and managing director of
the Mahindra Group.
➢ Mahindra Satyam stated that it has secured contracts worth Rs 38 crore
in the Middle East and North America region (MENA) in Q2 of FY
2009-10. of satyam computer Ltd

Boards of directors

C. Achuthan

C. Achuthan was appointed to the Board on January 11, 2009 as an

independent director. Previously, Achuthan was the Chairman of the
Securities Appellate Tribunal. Prior to that, Achuthan was a member of
the Securities and Exchange Board of India (SEBI). Achuthan is
currently a member of the board of directors of the National Stock
Exchange of India Ltd. and a trustee of the ING Mutual Fund.
Achuthan holds a masters degree in economics from Kerala University and a
degree in law from Bombay University.

T. N. Manoharan

T.N. Manoharan was appointed to the Board on January 15, 2009 as an

independent director. Manoharan is a member of the ICAI with 25
years of experience as a chartered accountant in India. Manoharan is
also a visiting faculty member at the Reserve Bank of India Staff
College. Previously, Manoharan served as Chairman of the ICAI
Accounting Research Foundation, President of the ICAI, member of the
Accounting Standards Board of the ICAI and member of the Accounting
Standards Committee of SEBI. Manoharan is currently a member of the board
of directors of Sahara India Financial Corporation Limited, Alpha Capital
Management Private Limited, the Nani Palkhivala Arbitration Centre and MCA
Management Consultants Private Limited. Manoharan holds a bachelors degree
in commerce from Pachaiyappa’s College, Madras University, a masters degree
in commerce from Sri Venkateswara University, Andhra Pradesh, and is a law
graduate from Madras Law College, Madras University

C. P. Gurnani

Gurnani (CP to his colleagues) is the CEO of Mahindra

Satyam. Prior to moving to Mahindra Satyam, CP headed
Tech Mahindra’s Global Operations, Sales and Marketing
functions, and led the development of Tech Mahindra’s
Competency & Solution units. CP’s inimitable style of
leadership combined with his sharp focus on customer experience has helped
Tech Mahindra to emerge as one of the leading providers of IT Services and
Telecom Solutions to the global telecom ecosystem.

CP has extensive experience in building international business, start-ups,

turnarounds, joint ventures and mergers & acquisitions. In a career spanning
over 28 years, he has held several leading positions with HCL Hewlett Packard
Limited, Perot Systems (India) Limited and HCL Corporation Ltd. Prior to
joining Tech Mahindra, CP was the Chief Operating Officer and a co-founder of
Perot Systems (India) Limited, initially set up as HCL Perot Systems. At HCL
Perot Systems, CP orchestrated the HCL Corporation and Perot Systems joint
venture from its inception to making it one of India’s top IT services

CP received a chemical engineering degree from the National Institute of

Technology, Rourkela. He serves on the boards of Canvas, Tech Mahindra
(Thailand) Limited, Tech Mahindra (Beijing) IT Services Limited, Mahindra
Log soft and Tennenbaum Institute in Georgia Institute of Technology among
CP takes keen interest in community work and was nominated by Ernst &
Young for the Entrepreneur of the Year Award in 2007.

Ulhas N. Yargop

Ulhas N Yargop, 55, is the President, IT Sector and Member,

Group Management Board of Mahindra & Mahindra Ltd.

Yargop joined Mahindra & Mahindra Ltd in 1992 and has

worked as General Manager — Corporate Planning, General
Manager — Product Planning, General Manager, Mahindra-
Ford Project, and as Treasurer of Mahindra & Mahindra Ltd. He was appointed
as President, IT Sector in 1999. The IT Sector includes Tech Mahindra (focused
on the telecom vertical) and Bristlecone (focused on supply chain consulting).
Yargop is also responsible for Mahindra SIRF, the corporate venture capital
activity of the Mahindra Group. He has previously worked with GKN
Automotive Inc., USA as Director of Finance and later with GKN Invel
Transmissions Ltd., New Delhi as General Manager — Commercial. He also
worked with The Standard Batteries Ltd., Mumbai as Vice President —

Yargop received a bachelor of technology degree in mechanical engineering

from the Indian Institute of Technology, Madras and a master’s in business
administration degree from the Harvard Business School.

In addition to his responsibilities at Mahindra & Mahindra Ltd, Yargop’s

principal directorships include his serving as a director on the boards of
directors of

Tech Mahindra Limited, Venturbay Consultants Private Limited, Mahindra

Logisoft Business Solutions Limited, Canvas Technologies Limited, Mahindra
& Mahindra Contech Limited, Mahindra Engineering Services Limited,
Bristlecone India Limited, Mahindra-BT Investment Company (Mauritius)
limited, Mahindra Telecommunications Investment Private Limited,
Officemartindia.com Limited, AT&T Global Network Services India Private
Limited, Tech Mahindra (Americas) Inc, Tech Mahindra GmbH, Bristlecone
Limited Cayman Islands, Bristlecone Inc.

M Damodaran

M Damodaran, IAS (Retired), is currently practicing as an independent

consultant in diverse areas of management. He has over 30 years of experience
in financial services and public sector enterprises and has served as the former
Chairman of the Securities and Exchange Board of India (SEBI), Chairman and
Managing Director of Industrial Development Bank of India (IDBI) and as
Chairman of the Unit Trust of India (UTI). He has also held various positions in
the Ministry of Finance, the Ministry of Information & Broadcasting and the
Ministry of Commerce.

Gautam S Kaji

Gautam S Kaji is the former Managing Director for operations of the World
Bank with responsibility for Africa, East Asia and the Pacific and South Asia.
He also led the World Bank's finance and private sector development programs
and served as chair of the World Bank's operations committee, which reviews
all projects put forward for World Bank support. Prior to this, he worked in a
commercial bank. He is currently Chairman of Centennial Group - a
Washington-based Policy and Strategic advisory firm and their non-profit
initiative `The Emerging Markets Forum
Executive management team

 Vineet Nayyar
Vineet Nayyar is the Chairman of Mahindra Satyam.
An accomplished leader, Vineet has led several
organizations across industries creating high
performing teams and successful businesses. He has a
rich and varied experience having worked with the Government,
international multilateral agencies and the corporate sector both public
and private in a career that spans over 40 years.
 C P Gurnani
Chief Executive Officer

Gurnani (CP to his colleagues) is the

CEO of Mahindra Satyam. Prior to
moving to Mahindra Satyam, CP headed
Tech Mahindra’s Global Operations,
Sales and Marketing functions, and led the development of
Tech Mahindra’s Competency & Solution units. CP’s
inimitable style of leadership combined with his sharp
focus on customer experience has helped Tech Mahindra to
emerge as one of the leading providers of IT Services and
Telecom Solutions to the global telecom ecosystem.

 A. S. Murty
Chief Technology Officer (CTO)

A.S. Murty (also known as ASM), in his

current role as Chief Technology Officer
(CTO), is responsible for technology
competency and innovation, as well as the
creation of technology assets and IP, especially for
Enterprise Business Services and new technology areas.
 Atul Kunwar
President - MEA, Europe, India,

Previously, and Atul was leading Tech

Mahindra’s Asia-Pacific, R&D services
(to Telecom equipment providers), policy
Networks (security products division) businesses and
M&A portfolio.

In an impressive career spanning over two decades in the

IT/BPO services, Telecom & Technology business
domains, Atul has successfully steered
companies/businesses & multi-cultural teams through start-
up, growth, turnaround, mergers & restructuring phases at
leading organizations such as 3Com, Bharti BT Internet,
eFunds, HCL, Syntel, and TransWorks (Aditya Birla

 Vijayanand Vadrevu
Senior Vice President - Strategic

In his new role, Vijay will be assisting the

CEO, in providing leadership on
“Strategic Initiatives” to Mahindra
Satyam, and will play a key role in scripting the growth
plans of the organization.

Vijay has a vast experience in IT services industry with

over 17.5 years with Wipro Technologies. For the last 3
years, he was working as Vice President and Head for Life
Sciences Vertical solutions, responsible for Strategy, Sales
and Delivery and was instrumental in shaping it as one of
the fastest growing Verticals.
 Dilip Jha
Senior Vice President, Business Head –
Middle East, Africa & India
Dilip Jha has over two decades of experience in
starting and leading the Indian operations of several
high technology companies. He has a B. Tech
degree in Electrical Engineering from the IIT Kanpur and an MBA
from IIM Calcutta.

 Hari Thalapalli
Chief Marketing Officer (CMO) and Chief People
Officer (CPO)
Hari Thalapalli serves as the Chief Marketing Officer
(CMO) and Chief People Officer (CPO) of Mahindra Satyam. He has
over two decades of experience in the IT industry and has been with
Mahindra Satyam for the past 11 years - playing vital roles in the
organization’s growth and during its turbulent phase in the recent past.

In his previous role as Head of Global Marketing and Communication,

Thalapalli brought to fore his understanding of people behavior to drive
innovation and visibility enhancing programs for the organization.

 Padma Parthasarathy
Head – Special Initiatives

Padma Parthasarathy is responsible for special initiatives,

especially related to the integration between Mahindra
Satyam and Tech Mahindra. She has been managing a number of post-
acquisition activities at Mahindra Satyam, since May 2009.
 Rakesh Soni
Chief Operating Officer & Chief Delivery Officer
- Manufacturing, Commercial & Services

Rakesh Soni will head the delivery for the Manufacturing,

BFSI, emerging verticals and strategic accounts for the Americas. He
will also handle sales for these verticals on a
At Tech Mahindra he was the COO and, was responsible for leading the
operations and service delivery leading teams of software service
delivery, technical support, administration, infrastructure and quality.
Rakesh has successfully spearheaded several challenging projects
within strict timelines and budgets.

 S Durga Shankar
Chief Financial Officer (CFO)

S. Durgashankar (“Durga”), is a Chartered Accountant

with over 25 years experience in various facets of
Finance - as a Banker, Corporate Treasurer, Head of
M&A and as Group CFO.

Prior to M&M, Durga was with ICICI Ltd (erstwhile development

financial institution) for a period of 13 years and was head of its
Chennai Zonal operations.

 Manish Mehta
Chief Delivery Officer - Europe, APAC, MEA,
Manish Mehta is the Delivery Head for Europe,
APAC, MEA and India regions in Mahindra Satyam.
Previously, Manish was heading Mahindra Satyam’s
SAP and Managed Testing practices. Manish propelled Mahindra
Satyam’s SAP and testing practices into the global marketplace. The
top 5 global players by Forrester, and won Frost & Sullivan’s
Competitive Strategy Leadership Award for Offshore Testing Market


 Bi & Pm
 Business value enhancement
 B2B / EDI
 Content, process, Ux management
 Digital convergence
 Infrastructure services
 Integrated engineering solutions
 Operations management
 Oracle solutions
 Product and application testing
 Product lifecycle management (PLM)
 Platform solutions
 SAP solutions
 Supplier relationship management
Satyam scam

 NEW DELHI, Jan 9 (IPS) - India’s government, its

corporate sector and its people are stunned after the
founder-chairman of one of the country’s largest
information technology (IT) services companies admitted to
years of falsified profits and an audacious financial fraud
worth 1.5 billion dollars.
• The founding promoter of Satyam Computer Services Limited,
Ramalinga Raju, resigned as the company’s chairman on
Wednesday, putting out a confessional statement admitting that
roughly 1.5 billion US dollars (or the equivalent of 70 billion
Indian rupees) of the firm’s past funds were "non-existent".
• What has shocked analysts is that the money, that is now
supposed to be fictitious, had been recorded in Satyam’s balance
sheets and books of account that had been audited by the
internationally reputed firm of auditors,
• Raju, who is politically influential, disclosed details of the fraud
in a resignation letter to the company’s board of directors
forwarded to stock exchange authorities as well as the regulator
of the country’s capital markets, the Securities and Exchange
Board of India (SEBI).
• Of the revenue reported as of Sep.30, 2008, the letter said,
almost 1.03 billion dollars, or 95 percent, never existed.
• SEBI’s chairman C.B. Bhave described the financial
wrongdoing in Satyam as an event of "horrifying magnitude".
• The scam has dominated the India media and what is ironical is
that the Indian word "Satyam" translates as "truth".
A most alarming aspect of the episode was that Raju
acknowledged that his company’s financial records had been
fudged and manipulated for the "last several years".

"It was like riding a tiger, not knowing how to get off without
being eaten," wrote the disgraced Raju in his letter.
• While there were rumours that Raju had fled India, his lawyer
has said he is in Hyderabad, the capital of the southern Indian
state of Andhra Pradesh, where the Satyam is headquartered.
• On Wednesday, Raju’s announcement had knocked the
company’s stock down a crippling 78 percent and sent the
sensitive index of the stock exchange at Mumbai, India’s
financial capital, plummeting by a substantial 7.3 percent. The
share price came down further on Friday.
• This scandal came barely a week after the government in New
Delhi announced an economic stimulus package to revive the
markets that have been adversely impacted by the ongoing
worldwide recession.
• Until recently, Satyam used to be India’s fourth-largest IT
company, specializing in developing computer software and
business process outsourcing.
• Satyam's stock is listed on the New York Stock Exchange, it had
business operations in 66 countries and counted 185 companies
in the Fortune 500 list as its clients and customers.
• "It’s a wake-up call for the Indian corporate sector," said Ashok
Kumar Bhattacharya, national managing editor of Business
Standard newspaper in an exclusive interview to IPS.
"Companies have to stick to the rule-book," he added.
• Investors, along with Indian government agencies, are now
demanding answers to why the value of their stock came down
by more than 1.9 billion dollars in one day on account of a
scandal that is being described as "India’s Enron" in reference to
the U.S. energy company that filed for bankruptcy in 2001,
leaving 5,000 people jobless and eliminating one billion dollars
in employee retirement funds.
• Many of Satyam’s 53,000 employees are expecting
unemployment as the dimensions of the scandal unfold,
investors withdraw and it is discovered how the company’s
coffers are almost empty. The 1.5 billion dollar fraud outweighs
the company’s entire salary bill for the last year of a little over
one billion dollars.
• The downfall of Raju, a 54-year old software industry veteran,
began nearly one month ago when Satyam attempted to acquire
two companies controlled by his sons - Maytas (Satyam spelled
backwards) Properties and Maytas Infra - for 1.6 billion dollars
in order to compensate for the holes in his books of account.
• The deal was abandoned 12 hours after it was announced when
investors objected, claiming it was an irresponsible misuse of
funds and an instance of nepotism.
• The Maytas deals acted as a red flag for international investors,
with a host of companies like Unpaid Systems of Britain
accusing Satyam of fraud, forgery and breach of contract.
• Shortly thereafter, on Dec. 23, the World Bank barred Satyam
from offering its computer services for eight years citing a
potential trail of corruption - data theft and bribery - that led to
• The last straw perhaps came on Tuesday when an Indian
associate of Merrill Lynch terminated an agreement on grounds
of "material accounting irregularities".

Satyam’s worth estimated at seven billion dollars, barely six

months ago, is now worth less than 330 million dollars.

In an IPS interview, Arun Kumar, professor of economics at

New Delhi’s prestigious Jawaharlal Nehru University, said the
so-called "independent" directors on the Satyam board were not
truly independent and added that auditors often acted in
collusion with corrupt company managers.
• "I’m not at all surprised that the auditors played along with the
top management of this company and allowed executives to
cook books of account," said Kumar who has authored a book
on India’s illegal - or "black" - economy.
• "The government is not looking to take over the companies. The
corporate world must respond to this," Kamal Nath, India’s
industry and commerce minister was quoted as saying. "The
government should only look at the regulatory part of it," he
• The government has stepped in to investigate all important
directors and employees associated with Satyam who could be
involved in the fraud. All those found guilty could face up to ten
years in prison. The auditing licenses of the partners of
PricewaterhouseCoopers could also be revoked.
• "The system has to be strong, but individuals make the system.
The rules were in place but individuals broke these rules and
threatened the system,’’ says Bhattacharya.
• Though Raju’s resignation letter attempts to accept personal
responsibility for the misdemeanors, there is a view that many
others were involved and complicit.
• Kumar said it was "near-impossible that those close to the inner
workings of Satyam were completely unaware of what was
going on".
• Whereas some argue that the Satyam scandal will not have a
long-term negative impact on the working of India’s reputed
information technology (IT) industry, others say it could
negatively impact India’s booming IT services which chalked up
overall sales worth 52 billion dollars in 2007-2008.

• Anand Mahindra, vice chairman and managing director of

M&M, a leading commercial vehicles manufacturing company,
went on record stating: "This development has resulted in
incalculable and unjustifiable damage to Brand India and Brand
IT in particular". He added that the "whole of Indian industry
should not be tarred with the same brush".
• But other corporate managers see positive fallouts to the Satyam
episode. ‘’After what happened there is bound to better self-
regulation among Indian IT companies,’’ said Puneet Kumar, a
top manager at WIPRO, a globally respected, Bangalore-based
IT company.
• ‘’Satyam was an aberration,’’ Puneet Kumar said. ‘’The fact is
that the IT industry thrives on good reputation and every major
in the business lays great emphasis on maintaining global
standards of corporate governance.’’
 Satyam Scam a reflection on Services Business?
I am sure by now all of you know about the Satyam scam and how the
companies management was involved in a massive $2 billion scam. But one of
the most important thing which this complete scam has brought out is the
dwindling margins on the IT Services Business. Satyam as per Raju only
operated on a 3% margin. Now this 3% margin can be a reflection of the gross
mis-management of Satyam or simply put bitter reality of the services business.
Lets leave Infosys, Wipro & TCS aside as I believe that customers might be
paying them a premium for who they are which is essentially translating to the
high margin.

Satyam Scam - Separating truth from lies

What is ‘known’ as of now is that over an extended period of time, the
promoters decided to inflate the revenue and profit figures of Satyam. In the
event, the company has a huge hole in its balance sheet, consisting of non-
existent assets and cash reserves that have been recorded and liabilities that are
unrecorded. According to the ‘confessional’ statement of Mr. Raju, the balance
sheet shortfall is more than Rs.7000 crore.
Why did a leading company in one of India’s most successful industries of
recent years need to inflate profits? After all, the revenues of India’s IT industry
have grown at a scorching compound annual rate of almost 30 per cent in the
past eight years, driven by exports. This is remarkable, assuming that revenue
and profit inflation have not excessively overstated performance. With cheap
skilled labour having shored up profits that were lightly taxed when compared
with the norm, net profits must have been substantial and rising too. Why then
did the fourth largest IT company choose to take the criminal route of falsifying
accounts and indulging in fraud?
One possible cause could be the desire to drive up stock values. The benefits
derived by promoters from high stock values are obvious, allowing them to buy
into real wealth outside the company and giving them the ‘invasion money’ to
acquire large stakes in other firms. This tendency was epitomised by the
benefits derived by America Online when it merged with Time Warner.
Although the latter had more assets, revenues, and customers, AOL’s higher
market capitalisation led to that company and its chairman, Steve Case, getting
more out of the deal than did long-time giant Time Warner.
There is some suspicion that Mr. Raju and his family may have sought similar
benefits. The family chose to build its shareholding in Satyam Computer
Services and shed it when required. For example, in year 2000 Satyam
Computer merged with a related company, Satyam Enterprises. Raju’s cousin,
C. Srinivasa Raju, who held 800,000 shares, or 19 per cent, in Satyam
Enterprises, was reportedly allotted an equivalent number in Satyam Computer,
leading to criticism that relative prices did not justify the 1:1 swap.
But the original promoter’s share held by the Raju family and their subsequent
acquisitions were not for keeping. Though the precise numbers quoted vary,
according to observers the stake of the promoters fell sharply after 2001 when
they held 25.60 per cent of equity in the company. This fell to 22.26 per cent by
the end of March, 2002, 20.74 per cent in 2003, 17.35 per cent in 2004, 15.67
per cent in 2005, 14.02 per cent in 2006, 8.79 in 2007, 8.65 at the end of
September 2008, and 5.13 per cent in January 2009 (Business Line, January 3,
2009). The most recent decline is attributed to the decision of lenders from
whom the family had borrowed to sell the shares that were pledged with them.
But the earlier declines must have been the result either of sale of shares by
promoters or of sale of new shares to investors. According to audited balance
sheet figures (if they are to be trusted) available from the CMIE’s database, the
paid-up equity in Satyam Computer Services rose from Rs. 56.24 crore in
March 2000 to just Rs. 64.89 crore by March 2006 and further to Rs. 133.44
crore in March 2007. Overall, the number of shares held by the promoter group
fell from 7.16 crore (22.8 per cent) to 5.8 crore (8.6 per cent) between

 Satyam’s 7 steps to save employees »

I am at shock. Specially because Satyam employees with average salary
of 70K per month are sure feeling helpless than I am at this time. Yet at the end
of the day I think what can Satyam’s upcoming plan be? to increase the morale
of it’s present employees and save them. Here are a few picks
1. Satyam and PwC may form a email marketing group called Satyam Pwc
Advertisement and Marketing (SPAM) to pursue lenders through
advanced email tactics in lending money.
2. Raju might provide free ebook version on budhdhism and spirituality to
every employee through SAAS (Satyam Aesthetics and Advanced
Spiritualism) model (who said? Dalai Lama??)
3. Satyam might ask employees to jointly produce films under bollywood
banner to better the chances through box office, some films can be “Raju
Bawra”, “amdani athanni, kharcha rupaya”, “EMI2 - kab du? kaise du?”,
“satyam, shivam, scandalam”, “MAYTAS aapke hain kaun?” “Raaz 3 -
Scandal continues..” come on…give me some titles..
4. Satyam might start body shopping employees with or can even create a
career site for satyam employees like “topsatyamemployees.com” or
“satyamcvs.com” or “satyamcareers.com”
5. Satyam might form a new ally with PwC and form SCAM (Satyam
Creative Accounts Management) and might go for auditing other big
giants of India, their average charge for audit will be 4.3 crores
6. PwC might create an awareness program to save its client Satyam (on
demand by Raju). The campaign might be called “PWC - Please Wear
Clothes”, which additionally means “just clothes” are allowed, employees
should sale off their new SX4, Imate, Apple Mac and Handycams..
7. SATYAM might plea the government for saving them and defining the
truth behind SATYAM as an acronym of “Some Accounts Tactically
Yucked for Advanced Management”
No advance tax paid by Satyam in FY09
Satyam Computer has not paid a single rupee as advance tax in the first
three quarters of the current fiscal, though the IT company paid Rs 25 cr as
fringe benefit tax (FBT) till December 15. However, most of its IT peers,
including Infosys Technologies, Tata Consultancy Services (TCS), Wipro,
Cognizant Technology Solution, Patni Computer Systems, Veritas Software,
MphasiS, iGate Global Solutions, Cisco Systems and MindTree, have paid
advance tax this fiscal, sources in finance ministry told SundayET.
As payment of advance tax is always considered an indicator of
profitability of a company, Satyam’s non-payment of advance tax could also
imply that trouble had been brewing for a long time. Though IT companies get
some tax benefits under Section 10 (A) of the I-T Act, Satyam’s zero payment
of advance tax even as smaller companies coughed up the tax, has already
raised questions in North Block.
Various government agencies, including Central Board of Direct Taxes
(CBDT), have begun investigations into the Hyderabad-based company after its
chairman and founder Ramalinga Raju stepped down after confessing a Rs
7,000-cr fraud. A source in the finance ministry has, however, said advance tax
payment should be seen along with the company’s FBT and tax deducted at
source (TDS) figures. “But yes, despite the slowdown, most IT companies have
paid advance tax this fiscal whereas it’s zero in case of Satyam,” he added.
Significantly, Satyam paid a meagre Rs 5.4 cr as advance tax last fiscal.
Advance tax is paid four times a year and is paid on the basis of a company’s
projection of annual net profit. SundayET did not receive Satyam’s TDS figures
for the current fiscal. Satyam’s FBT payment in Q3 too was below expectation
of taxmen as it paid just Rs 5.5 cr against Rs 25 cr during the same period last
fiscal, indicating that the company began to cut cost on fringe benefits extended
to its employees.
The total FBT collection as on December 17, 2008, stood at Rs 5,667 cr,
registering a 43% rise from the same period in FY07, according to data
available with CBDT.
added to News & Media by Vaibhav Sanghrajka
tags:cisco systems, cognizant technology solution, finance ministry, igate global
solutions, infosys technologies, mindtree, patni computer systems, slowdown,
tata consultancy services
Satyam Scam: A Shame for the nation
The 7000 Crore Satyam Fraud has not only tarnished the very meaning of
Satyam,the first of the three words describing GOD, himself (Satyam,Shivam
,Sundram) but has crashed and blasted all that stood in the name of truth, atleast
in the eyes of the common man.
It may have not killed any,but its impact is akin to the aftermath of the Mumbai
blasts,or even worst!The Mumbai Blasts left behind a perpetual scare in every
mans mind,and this astonishing scandal besides leaving thousands jobless,and
millions paupers,has created a great financial insecurity amongst the masses.
One has become accustomed over the last decade to scams running into
hundreds and thousands of crores,but this is the Father of all Frauds, which has
left the world numb,dumb and scaringly shocked!!!!!!! If the fraudulent
accounts of such mega organizations can skip the vigilant hawky eyes of the
financial auditing wizards,then no accounting or auditing system of the country
of the world is above suspicion!
Its not only the investors or the employees and others related to Satyam,who
have been affected,but this financial blast has created an undesirable state of
disbelief in the complete corporate world,and a distrust in the investment
system and stock market,that will prove to be highly detrimental for the
economical growth of the country.
Besides taking all possible steps to revive the firm,and to gain back the trust of
all concerned,the culprits should be given exemplary punishments which may
prove to be great deterrents for all in future,to even dare to convert the Satyas of
the financial and corporate world to Mithias!!!!

Raju spends time in jail reading books,

Disgraced former chairman of Satyam Computers, B Ramalinga Raju
spent his fourth day in the Chanchalguda Central prison reading books, news
magazines and newspapers.
Raju has been shifted from the regular admission block to the nearby
barrack where he is leading a quite life and is remained to himself, a senior
prison official told PTI.
Besides his routine activities in the jail, Raju is also going for a stroll in
the evening hours, the official said.
As per the magistrate’s directions, Raju’s health is also being checked on
a routine basis, he said.
Raju, who confessed to fudging Satyam’s accounts to the tune of Rs
7,800 crores, was sent to judicial custody on January 10 and is now spending
most of his time in the jail by reading books and is keeping himself abreast with
latest developments through newspapers.

Effect of satyam scam on market

Although several companies are trying to have a bite into Satyam Computers,
according to Gartner study, the company is likely to exist in its current form.
It is expected to discontinue some of its businesses, service lines or cease to
exist in certain geographies by 2010. The study indicated that even the name
Satyam may not be around by that time, as the company is expected to undergo
a complete change, in ownership and organizationally.
Satyam’s ability to sign on new clients during 2009 has significantly
diminished, says the study. ‘‘In addition, it will be challenged to invest in client
engagements, staff developments or R&D, all critical elements for IT services,’’
said Gartner’s V-P for research, Frances Karamouzis.

Ex-Satyam Director Resigns From Sasken

Serial entrepreneur and NewPath Ventures co-founder Vinod K Dham
resigned from the board of Sasken Communications as an independent
director, a top official of the communications solutions provider said on
“Yes, Dham has resigned as a director of the company from the board on
January 17,” Sasken chairman and managing director Rajiv C. Mody told IANS
but declined to elaborate.
“We will inform you later, as we are busy with investors and analysts in a
conference call on our third quarter performance,” Mody added.
The US-based Dham resigned from the board of the fraud-tainted Satyam
Computer Services Dec 29 as an independent director over the IT bellwether’s
aborted bid to acquire the two Maytas realty firms, run by the two sons of its
disgraced founder and former chairman B. Ramalinga Raju.

Y S Reddy Denies His Support For Raju

The political blame game around Ramalinga Raju, the founder of Satyam
Computer Services and main accused over the Satyam scam has begun. Andhra
Pradesh Chief Minister Y S Rajashekhara Reddy on Monday dismissed
charges that he was responsible for the rise of Satyam’s tainted founder
Ramalinga Raju and instead sought to put the blame on his predecessor and
TDP leader N Chandrababu Naidu.
“By the time I became the Chief Minister, Raju had already risen to very
high level. I am not responsible. In no way, he needed my promotion. All the
promotion was already done,” he told reporters.
Post Satyam Scam, Indian Students Shun IT
The Satyam effect has starting spreading its tentacles, and has proved to
have a negative impact on the Engineering students. IT (Information
Technology) which used to be the Mecca of all jobs is now the
outcaste.Students are prefering to take jobs in their core branches rather than
move to the dwindling IT sector.
“I was offered a job as trainee employee at Satyam last year. But after the
fiasco has happened at Satyam, I have changed my mind to get suitable job in
other firm,” said Divyadeep Goyal, a student Mechanical Engineering student
of University Institute of Engineering and Technology (UEIT), who was offered
an annual package of Rs 3.25 lakh in Satyam.
Echoing similar views, Sumant, another final-year student of the same
college, said, “The impact of Satyam fraud has been so damaging that we now
do not have any intention to join the IT company. Rather we will look for job in
other sectors.”
The total number of engineering students placed by Satyam from this
region was not available but some colleges have shared their placement figures.
Almost 80 students from the Institute of Engineering and Technology
were selected by Satyam last year, while 13 students were placed from Punjab
Engineering College (PEC) and seven were from UIET.
Students were offered an annual package between Rs 3 lakh and 3.5 lakh.
Satyam May Get Financial Support From
The Government certainly can not remain aloof and allow Satyam to die
off especially when it provides occupation to 53,000 odd people and indirectly
supports more than a million Indians. While it is debatable that whether the tax
payers money be used to bail out a company which deliberately got involved in
a scam.
The troubled Satyam Computer Services, facing a liquidity challenge,
may get financial support from the government, which is willing to New
Satyam board members consider “all aspects” of helping the crisis-ridden
company, Commerce and Industry Minister Kamal Nath said on Monday.
Since it was a question of saving jobs and an international Indian brand,
the government would consider all the proposals from the newly-constituted
board, Nath said. When asked whether the government could extend even
financial help to Satyam, Nath said, “Of course. There are many jobs at stake
and institutional stakes.”
The Satyam Scam Has Dented India Inc.’s
Image Abroad : Govt
Huge losses to investors aside, the Satyam scandal has caused “serious
damage” to India Inc’s reputation as well as the country’s regulatory authorities
outside, the government has said.
Seeking to dismantle the existing board and to nominate ten new directors
at the beleaguered IT firm, the Centre has said in its petition before the
Company Law Board that the “interests of the company will not be safe in the
hands of the present board of directors.”
“The admission of fraudulent manipulation of the financial affairs
has created an adverse impression in the minds of the trade, business and
industry across the world.”
“This has also resulted in serious damage to the reputation of Indian
Corporate sector and the regulatory mechanism in the eyes of the world,” the
government said.
Allowing the government to nominate 10 new directors, the CLB said in
its order that the “present board of directors stands suspended with immediate
effect” and the new board should meet within seven days of its constitution and
“take necessary action to put the company back on the road.”
It also asked the new board to submit periodical reports to the Centre and
the CLB on the company’s state of affairs.
The CLB also observed that the residual board members at the company
after a string of resignations are those “who were also party to the impugned
decision to invest substantial funds in the companies related to Raju, the
decision of which was the starting point of the downward trend in the fortunes
of the company.”
Besides Satyam, Ramalinga Raju and brother Rama Raju, the government
in its petition has also named the company’s CA and auditor Price Waterhouse,
Company Secretary as well as all the directors.
This include also those independent directors who have resigned —
Vinod Dham, Rammohan Rao, K G Palepu and Mangalam Srinivasan, as well
as former Cabinet Secretary T R Prasad, V S Raju and interim CEO Ram
The CLB has also asked all the respondents to submit their replies to the
petition by February 20.
The CLB had ordered the Central Government to immediately constitute
a fresh board of the company with not more than ten “persons of eminence as
“The Central Government may also designate one of them as the
Chairman of the Board… The said Board will continue till further orders.”
The government said in its petition that Satyam has about three lakh
shareholders, over 53,000 employees and has clients in over 60 countries,
besides India. It has received a number of awards for best corporate governance.

Indian Firms Reviewing Fraud Control

In the face of the Satyam scam and its deadly repurcussions, Indian firms
are looking into methods to avoid scenarios of such scams within their
Indian companies have started to review and document their risk
management policies and practices to check corporate fraud in the wake of the
Rs.70 bn Satyam Computer Services scam, a survey by an industry lobby says.
A quick analysis by the Associated Chambers of Commerce and Industry
of India (Assocham) with feedback of over 400 leading corporates, said that to
deter possible corporate frauds, companies have commenced re-codifying their
risk management policies.
However, about 85 percent of the respondents said although Clause 49 of
the market regulator’s Listing Agreement clearly states that the management
and the board of directors must accept responsibility for not issuing accurate
financial statements, most officials at this level managed to get off the hook
even if found guilty.

statements, most officials at this level managed to get off the hook even if
found guilty.
On the other hand, about 80 percent of respondents argued that putting
these programmes and controls in place will help organisations to set the tone of
zero-tolerance to fraud and create a mechanism for employees to report
wrongdoing to the appropriate authorities.

ICICI And SBI Banks Submit Details Of

Satyam Exposure To RBI
As part of its probe on scam-tainted Satyam, RBI today collected
particulars of transactions that various banks including SBI and ICICI
Bank had with the IT company. “We have submitted the details of our
business deals with Satyam to the Reserve bank.

In the wake of these developments (in Satyam), banks are bound to be

extra cautious while lending to such corporates,” SBI’s Chief Financial Officer
Ashok Mukand told PTI here. When asked, Citibank declined to comment if the
company was its client and whether the bank had given details to RBI. “We are
unable to comment due to client confidentiality,” a spokesperson of the bank

The Satyam Effect : US Listed Indian Stocks

Take A Beating
The Satyam scam effect has started its infectious presence. U.S. listed
stocks of other Indian companies have started taken a severe beating.
Indian stocks listed on the American bourses suffered a loss of close to $
2 billion in a week, following unfolding of India’s biggest
Despite, a halt in trading in Satyam Computer from Wednesday, the rest
of the 15 Indian stocks on US bourses bore the brunt of the negative market
sentiment and witnessed a fall of $1.94 billion in their combined market
capitalisation in the week ending January 9.
Meanwhile, the Hyderabad-based company, which traded on the first two
day of the week, added $ 2.66 billion on the speculations that some rival IT firm
might acquire it. The combined market-cap of all firms excludes Satyam’s
valuations for the two days.
What is the effect of Satyam Fraud on Indian
BPO Sector?
Ofocurse it will affect Indian Market a little bit. But i don’t think any
other country has such a large pool of trained resource as India has. China,
Brazil and Pakistan are some choices, but none of them can compete India for
their cheap and trained labour.
Also scandals in one or two companies doesn’t mean that whole country
is corrupt. So i don’t think its gonna effect that much. I do not believe this
fiasco will have longer-term ramifications for the Indian services sector, as long
as Satyam’s creative accounting turns out to be an isolated incident and not a
ch companies areproblem
more pervasive in the acrossrace to takeover satyam computer
the sector.

Tech Mahindra's bid for India's Satyam approved

India's Company Law Board on Thursday approved a bid from mid-sized
outsourcing firm Tech Mahindra to take over graft-tainted Satyam
Computer Services, an official said.

• Venturebay, a subsidiary of Tech Mahindra, will pay just over 350

million dollars for a preferential allotment of new shares in Satyam, to
pick up a 31-percent stake in the company by April 21.
• It will also make a public open offer for a further 20-percent stake at a
cost of over 225 million dollars to gain a majority holding in Satyam.
• "I accept the recommendation, with the hope that by adopting best
corporate governance practices, Venturebay would over the years make
Satyam regain its glory in real terms," the board's chairman S.
Balasubramanian said in a statement.
• Tech Mahindra won the bidding on Monday for Satyam, which has been
struggling since its founder confessed to falsifying its accounts in India's
biggest accounting scandal.
• It acts as back office for some of the world's biggest companies such as
Nestle SA, General Electric Co and General Motors Corp.
• Raju, his brother and seven other people, including two Price Waterhouse
auditors, are now in jail on charges of conspiracy, cheating, forgery and
falsification of accounts.

 Fortis also plans to invest an additional Rs 10 crore and increase its

sake to 76% by the end of the year.

• Fortis Picks 56% Stake in Apollo RM Hospital - Fortis Healthcare has

picked up 56% stake in the Bangalore-based Apollo RM Hospital,
through one of its wholly owned subsidiaries, for an undisclosed amount.
According to sources, Fortis has acquired a majority for around Rs 10
crore. Fortis also plans to invest an additional Rs 10 crore and increase its
sake to 76% by the end of the year. The former owners two urologist Dr
Mohan Keshavamurthy and Dr Lakshmi Narayana Raju will hold the
remaining stake. Apollo RM, which started in 2007 as a franchisee of
Apollo Hospital. The privately held hospital is now being rechristened as
Fortis Hospital. (The Economic Times)
• Bhushan Steel to Acquire Controlling Stake in Orissa Sponge Iron
and Steel - Delhi-based Bhushan Steel is close to picking a controlling
stake in Orissa Sponge Iron & Steel. Sources suggest that Bhushan Steel
is going to acquire the entire 34% stake held by the existing promoter,
Prashant Mohanty in Orissa Sponge. Bhushan Steel has already hiked its
holding in Orissa Sponge to 14.85% by acquiring a large part of 12.11%
owned by Chandra family of Unitech in Orissa Sponge. If Bhushan Steel
buys out Mihanty, its stake in Orissa Sponge will go up to 48.85%
triggering a mandatory open offer to purchase another 20% from other
shareholders, as per the takeover norms. (The Economic Times)
• The Hinduja Group Joins Race to Acquire Satyam - The Hinduja
group has joined the race to acquire the fraud-hit Satyam Computer
Services. The group has sent a formal communication to the investment
bankers of Satyam expressing its interest in Hyderabad based software
exporter. Hinduja Global Solutions, the new industry arm of the Hinduja
Group, has $130 million of cash in books to mount the takeover bid. The
promoters of the Hinduja Group have promised to contribute additional
funds if the group makes the bid. The group is already in discussions with
its bankers to raise additional funds if required. (The Economic Times)
• Bombay HC appoints Deloitte and Wipro as auditors in FT- NSE
Case - The Bombay High Court has appointed Deloitte Haskins & Sells
and Deloitte to conduct a systems audit of Financial Technologies’ (FT)
front-end trading solution (CTCL). The NSE had put the exchange
solutions provider on a watch list in October 2008 due to alleged flaws in
the software, following which FT dragged NSE to court. Before
undertaking the audit, the auditors will decide on the reference terms and
send a notice asking both FT and NSE to file their submissions and
objections. Both parties will share the fees of the third-party auditors, in
equal measure. (The Economic Times)
• Spice Corp to Acquire Stake in Cellucom - The BK Modi group
promoted Spice Corp is in talks with Dubai based mobile retailer
Cellucom to acquire stake in its Indian mobile retail chain. Cellucom,
which has about 120 mobile retail stores in India, has decided to dilute its
stake in its Indian retail arm. Last month, RP Goenka group had sold off
its 50% stake in the erstwhile joint venture to Cellucom. A buyout of
stake would help Spice Corp’s mobile retail business, Hotspot Retail to
expand its presence across India with an addition of 120 stores. (The
Economic Times)
• Fidelity Increases Stake in Satyam to 6.79% - Fidelity International
(FIL Asia Services Pty Ltd) has purchased 3.62% shares of Satyam
Computer Services, thereby raising its stake in the fraud hit company to
6.79%. The open market purchase was done by FIL and its direct and
indirect subsidiaries. This move makes FIL, which earlier held 3.17 per
cent stake, the second-largest stakeholder in Satyam after Larsen &
Toubro (L&T), which currently has a 12.04 per cent stake in the IT
company. (Business Standard)
• Biba Plans to Invest Rs 40 Crore to Increase Store Network -
Mumbai-based retailer Biba Apparels plans to increase its store network
to over 100 in the next two years by investing Rs 40 crore. The stores will
be set up in the metros, Tier II and Tier III towns. The stores will be
spread across 1,200 sq ft and would be self-managed. The company
intends to set up a minimum of 30 stores in 2009-2010, with each store
entailing an investment of Rs 40-60 lakh and spread across 1,000 sq ft
each. (DNA Money)
• Take Solutions- Four Soft Merger Called Off - The proposed merger
between the Chennai-based Take Solutions and the Hyderabad-based
Four Soft has been called off following differences on post merger issues,
including management. Both are providers of software products and
solutions in the supply chain management space. The merger was
proposed in March last year. The board of Take Solutions felt that it
would not be correct to ahead with the merger, considering the current
economic conditions. The two companies were also unable to achieve a
consensus on the possible management post merger. (Business Line)
• Sistema Shyam Eyes More Acquisitions in CDMA Business - The
latest entrant in mobile space, Sistema Shyam Teleservices is looking at
more acquisitions to get faster access to the Indian markets. The
company, which was among the operators to get new licences early 2008,
is aiming to offer CDMA-based mobile services across the country before
the middle of 2010. Sistema has already launched services in Rajasthan
and is planning to begin in Tamil Nadu and Kerala by March. The
company hopes to roll out services in at least 10 circles by this year-end
by launching services in one or two circles each month. Sistema has got
agreements with infrastructure companies to share towers. About 70-80%
of the towers on Sistema’s network are currently shared. SSTL is also
plans to give outsourcing deals for managing its IT and call centre
functions going forward. (Business Line)
• Sutter Health to Pick Stake in Jaipur Healthcare City - Multi-billion
dollar US-based not-for-profit healthcare organisation, Sutter Health is
planning to pick up a stake in the Rs 200 crore healthcare city being set
up by Narayana Hrudayalaya in Jaipur. Narayana Hrudayalaya is the
renowned cardiac care hospital in India started by cardiac surgeon Devi
Shetty and is setting up a chain of healthcare centres across many cities in
India called ‘Health City’. According to sources, the deal for Sutter
Health picking a stake in the Jaipur project is expected to be finalised by
the end of net month. (Business Standard)
• Goldstone Infratech Board Approves - Hyderabad-based
telecommunications equipment company, Goldstone Infratech Limited
(formerly Goldstone Teleservices Limited), is planning to merge
Newtech Stewing Engineering Limited, Shree Shree Telecom Private
Limited and Sun Plast O Met Limited with itself. A proposal to this effect
has been approved by the company’s board of directors in the meeting
held on January 29. (Business Standard)
• IOB Gets RBI Approval For Acquiring Shree Suvarna Sahakari
Bank - Indian Overseas Bank has got RBI's nod to go ahead with the
acquisition of Pune-based Shree Suvarna Sahakari Bank. The due
diligence report for the same will be prepared by the first week of
February. (The Economic Times)

 IBM leads race to buy Satyam

• New Delhi: Global IT giant IBM is learned to be leading the list of

prospective buyers of beleaguered Satyam Computer Services. If the plan
fructifies, IBM would become the largest IT services player in India with
a combined employee strength of over 125,000 people, reported Business
• According to sources close to the development, IBM officials has begun
• discussions with Satyam board and expressed its desire to acquire a
majority stake in the company. Moreover, a team of investment bankers
and lawyers from the U.S. and Europe has been brought in to assess the
size of the deal and the risks associated with it. It is also believed that
IBM has conducted an initial due diligence on some of Satyam's major

• Making easy entry for foreign players, Minister of Corporate Affairs P C

Gupta had said a week ago that open bids would not be restricted to
Indian players. IBM was named one of the hostile bidders for Satyam at
the company's meeting in the last December. Apart from IBM, other
prominent companies in the race are Larsen & Toubro (L&T), which
owns 12 per cent in Satyam, and B K Modi-owned Spice group.
• The government-nominated board is expected to invite bids for a 31 per
cent stake in the company, but is likely to assure the successful bidder 51
per cent even if it fails to get the additional mandatory 20 per cent from
the open offer.
• Analysts foresee that if IBM can buy Satyam, that can give IBM the
leverage to compete with Indian IT service providers as Satyam has a
low-cost structure.
• IBM entered the bidding process last month through a law firm, which is
a common practice in the West, but neither denied nor confirmed its
interest in acquiring Satyam. Satyam currently faces 13 class action suits
by holders of the company’s American Depository Receipts in the US,
after Satyam founder Ramalinga Raju confessed to a large-scale
accounting fraud on January 7. Upaid, a mobile payment specialist, has
also filed a suit claiming damages of $1 billion.
• An investment banker close to the deal said IBM was a big name and
could, therefore, be vulnerable to more lawsuits.
• IBM’s exit leaves the field open for engineering giant Larsen & Toubro,
which owns 12 per cent in Satyam, Tech Mahindra, Cognizant
Technology and private equity firm Wilbur L Ross.
• Meanwhile, Satyam’s government-appointed board has extended the
deadline for submitting the technical and financial bids to April 13, from
April 9, after L&T and Tech Mahindra had sought additional information
to enable them to prepare the bids.
• IBM is understood to have conducted due diligence on some of Satyam’s
major customers and was considered a good fit for the Indian company,
principally because of its brand-name and overlap in service offerings.
• Satyam’s low-cost structure, it was said, could have given IBM the
leverage to take on Indian IT service providers.
• In its annual report filed with the New York Stock Exchange in February
2009, IBM had named Satyam, along with Infosys and Wipro, as its main
• At Satyam’s board meeting on December 16, Ramalinga Raju had cited a
hostile takeover bid by IBM as a reason for proposing that Rs 8,000 crore
of cash be transferred to promoter-owned companies Maytas Properties
and Maytas Infrastructure. It was strong shareholder opposition to these
deals that precipitated Satyam’s crisis.
• IBM joins three other bidders that pulled out of the race. One was
Phaneesh Murthy-promoted iGate, which participated in the first round of
bidding, but backed out from completing the second round. Earlier, the
Hindujas group had decided to opt out. The B K Modi-owned Spice
group, which completed the second round of bidding, also withdrew for
“lack of transparency”.
• The Spice group now maintains it could re-enter the bidding if its
conditions for an “open auction and transparent process” are met. It has
written another letter to S P Bharucha, former Chief Justice of India who
is currently monitoring the bidding process, seeking an open auction
instead of tenders through sealed covers, besides requesting that the
identities of all the shortlisted bidders be revealed.
• The Satyam stock rose 13.6 per cent on the Bombay Stock Exchange, to
close at Rs 45.15.

Satyam jumps 7 percent on merger talks; HCL, Tech

Mahindra lead race

• Hyderabad - Shares of beleaguered technology outsourcer Satyam

Computer Services closed more than 7 percent up on Tuesday on
reports that the firm was mulling a possible all-share merger move or
even a takeover bid if the right suitor comes by.
• Satyam closed 7.31 percent up at Rs.179.10 at the Bombay Stock
Exchange on rumors that HCL Technologies and Tech Mahindra were
frontrunners in the race to buy India's fourth largest software services
• While HCL Technologies has been pitted as the best bet to buy
Satyam, financial daily, The Economic Times reported Tuesday,
citing an unnamed source, that Tech Mahindra, a leading IT services
and solutions provider to the telecom industry and a unit of tractor and
utility vehicle maker Mahindra & Mahindra, had approached Satyam's
top brass and is seeking for a deal that could involve gaining control
of a combined entity.
• All the three companies, however, have rubbished the reports, saying
they were market speculations.
• A Satyam official, on conditions of anonymity, said one should not
read too much into these reports till Satyam makes any announcement
following its board meeting scheduled for January 10.
• However, market analysts said that if technology firms like HCL
Technologies or Tech Mahindra were to forge a deal, it would be a
cashless merger involving "some stock swap element" as both the
suitors have low cash reserves

• Hyderabad, 14 Apr. Tech Mahindra Ltd. Placed the highest bid to acquire
Satyam Computer Services Ltd. On 13 April 2009. This is just over four
months after the massive accounting scandal was made public when the
founder, Ramalinga Raju, confessed to inflating the books to over $1
billion above their worth.
• The takeover bid is only a month after Satyam announced it was up for
sale. Tech Mahindra bid Rs 58 per share, above what Larsen & Toubro
and billionaire tycoon Wilbur Ross offered.
• Tech Mahindra will own 31% of the IT mammoth at a cost of Rs1,757
crore, or slightly more than US $350 million.
• “It looks like Mahindra got a bargain considering the firm is worth a
reported $2.1 billion. Who knows what the real value is, but it’s surely
more than Rs 1,757 crore for almost a third ofthe firm,” commented
Francesco Gopalakrishnan, EconomyWatch correspondent.
• “But then again, with the public’s suspicions up about accounting and
auditing mishaps in Indian IT firms, they would have to get a deal to take
over this scarred firm,” he added. “It’ll be a long, hard, road to build back
confidence and trust.”
• When the Satyam scandal hit the presses in early January this year,
rumors and suspicions about India’s IT Industry spread like wildfire. “I
didn’t think I could get any more business for a long, long time,”
lamented Ishan Singh, the owner of a small business process outsourcing
(BPO) firm in Hyderabad.
• Tech Mahindra plans to extend its ownership up to 51% by purchasing an
additional 20% at the same value. This brings Satyam’s valuation in
Mahindra’s eyes to $1.1 billion. Tech Mahindra bid 20% more than the
next-highest bidder and more than double the lowest bidder.
• Satyam has offices in a dozen countries and employs 40,000. It has more
than 650 clients around the world, and 185 of them are Fortune 500
• Tech Mahindra is an Indian conglomerate famous for its SUVs, tractors,
and financial services. This foray into IT and outsourcing
demonstratesthe firm’s eagerness to diversify and expand.
• During a news conference on Monday, Tech Mahindra Chairman Anand
Mahindra explained the synergy the two firms could create, “Both
companies can benefit from each other,” he said.
• “Satyam provides a partner which is almost completely complimentary,”
agreed Vineet Nayyar, vice chairman of Tech Mahindra.
• Tech Mahindra was comfortable placing such a high bid in part because it
and Satyam have almost no overlap. The bulk of Tech Mahindra’s
software business is in telecommunications, a sector Satyam has largely
kept out of.
• Furthermore, in excess of 70% of Satyam’s business is in the US,
providing additional diversification for Tech Mahindra.
• Whenever mergers or acquisitions are made, job cuts will occur. And
considering Satyam’s profit margins are below 3%, Tech Mahindra
intends on even more cuts to increase profits.
• But some are skeptical considering the lack of common ground the firms
share. “There doesn’t seem to be any common thread of synergy,” said
Edelweiss Securities analyst Viju George.
• However, the CEO of Satyam, A. S. Murty, was certainly thankful for
this renewal, “I would like to compliment each of the Satyamites and
their families for standing together and with unflinched support, taking
care of all our deliverables to our customers…We welcome the change
and we make sure that all our stakeholders are completely delighted.”
• Tech Mahindra, the successful buyer of Satyam, has asked European and
US competition authorities to approve the takeover.
• Sources told the Wall Street Journal that Tech Mahindra filed for
regulator approval in Europe on Monday and would do the same for US
regulators on Tuesday.
• Four Tech Mahindra executives, including MD Vineet Nayyar, were
invited to attend a Satyam board meeting yesterday - the four are
expected to join the board as the deal closes.
• The board said Satyam will keep its existing leaders, and for now will
continue to operate as a standalone business.
• Nayyar said Tech Mahindra had been impressed by Satyam's
management and staff, and had complete confidence in their ability to
restore the company's fortunes.
• Tech Mahindra is a telecoms specialist and is looking to Satyam to spread
its business into new markets. But the firm admitted its immediate
business was to retain worried customers and win back business lost as a
result of the recent crisis.
• Satyam's future was put into doubt when founder Ramalinga Raju
admitted inflating company profits by $1bn. He remains on remand along
with his brother and two PriceWaterhouse auditors.
• Tech Mahindra has also put cash into an escrow account to fund the buy.
• Dutch regulators have approved Satyam's request to be delisted from
NYSE Euronext.

 India Economy: Tech Mahindra wins bid to take over Satyam


• New Delhi - Tech Mahindra Ltd, the technology arm of India's Mahindra
Group, successfully bid for controlling equity in defrauded information
technology firm Satyam Computer Services Ltd, Satyam's board
announced Monday.
• Tech Mahindra outbid engineering major Larsen and Toubro Ltd, which
already owns 12 per cent equity in Satyam, and Nasdaq-listed technology
company Cognizant, which was backed by US-based private equity
investor Wilbur Ross, Satyam's board of directors announced at a press
briefing in Mumbai.
• The board of directors, appointed by the government after company
owner Ramalinga Raju admitted to fraudulent accounting of 1 billion
dollars in January, said the acceptance of Tech Mahindra's bid was
subject to approval by India's Company Law Board.
• Tech Mahindra subsidiary Venturbay Consultants Private Limited
offered 58 rupees per share (about 1.16 dollars) for controlling equity,
against 45.90 rupees by Larsen and Toubro and 20 rupees by Cognizant-
wilbur Ross, Satyam board member Kiran Karnik said.
• Shares of Tech Mahindra rose to end at 359.45 rupees, 12.31 per cent
higher than its previous close on the Bombay Stock Exchange.
• Britain's BT Group holds 31 per cent equity in Tech Mahindra. 'Our joint
venture partner BT was incredibly supportive,' Tech Mahindra managing
director Vineet Nayyar told a press briefing.
• Officials of Tech Mahindra, which is a major player in the telecom
sector, said the company had enough resources to meet the immediate
needs of its bid.
• 'The technical capabilities of Satyam are outstanding. Our group will
bring a layering of governance which had gone astray at a time,' Nayyar
said adding that the two companies were complementary.
• Industry analysts said the proposed acquisition would help Tech
Mahindra position itself as a lead player in the IT sector along with TCS
Infosys, Wipro and TCS.
• Mahindra Group chairman Anand Mahindra said the potential of
Satyam and faith in its future had driven his company to bid for it.
• Satyam's scrip jumped by 16.43 per cent during the day's trade but
closed just 3.61 per cent over its previous close at 48.85 rupees.
• The total valuation of 51 per cent controlling equity in Satyam at the
rate of 58 rupees per share works out to 28.89 billion rupees (579 million
• Tech Mahindra has to buy a 31 per cent stake in Satyam through a new
share issue and make an offer in the open market for an additional 20 per
cent shares.
• 'Once the CLB approval comes in and Tech Mahindra deposits the
required amount in an escrow account, it will be given management
control of the company,' Karnik said.
• 'The selection of the highest bidder, in a fair, open and transparent
process signals a new stage for the company in its progress towards
stabilization,' Karnik said.
• Acquiring Satyam was a good opportunity for Tech Mahindra to
expand its business, Karnik, a former head of NASSCOM, Indian IT
industry's trade body, added.
• Satyam Computer is India's fourth-largest information technology
services firm and operates in 66 countries. It has 48,000 employees and
counts 185 Fortune 500 companies as its customers.
• A majority of clients had opted to stay with Satyam despite its
problems and the bid offers indicated confidence in the company,
Satyam board member Deepak Parekh, one of India's top bankers, said at
the briefing.
• He said Tech Mahindra was expected to make a payment by April 21.
• Once the bid-winner takes control it would decide how to handle
Satyam's affairs, Parekh said, adding that the only condition was that it
cannot strip the company. 'It cannot break up and sell the company,' he
• The two Satyam campuses and real estate with the company in
headquarters Hyderabad, capital of southern Andhra Pradesh state, was
worth 15 to 20 billion rupees, the officials said.
Trading chart of satyam computer
Last Trade: 5.04
Trade Time: 10:07AM ET
Change: 0.04 (0.79%)
Prev Close: 5.08
Open: 5.03
Bid: N/A
Ask: N/A
1y Target Est: 5.00

Day's Range: 5.02 - 5.16

52wk Range: 0.78 - 12.99
Volume: 194,455
Avg Vol (3m): 2,382,850
Market Cap: 1.70B
P/E (ttm): 3.94
EPS (ttm): 1.28
Div & Yield: 0.03 (0.60%)
Satyam Computer Services Limited

• Satyam Computer Services Limited (Satyam) is a global information

technology (IT) services provider, offering a range of services, including
systems design, software development, system integration and application
maintenance. Satyam offers a range of IT services to its customers,
including application development and maintenance, consulting and
enterprise business solutions, extended engineering solutions and
infrastructure management services. The Company provides services to
customers from various industries, including insurance, banking and
financial services, manufacturing, telecommunications, transportation and
engineering services. Satyam BPO Limited (Satyam BPO), a majority-
owned subsidiary of the Company is engaged in providing business
process outsourcing (BPO) services. Satyam operates in two segments: IT
services and BPO services. As of July 6, 2009, Tech Mahindra Limited
had acquired approximately 31.04% of the Company’s outstanding shares
of common stock.
History of Infosys limited

 1981
• Infosys is established by N. R. Narayana Murthy and six engineers in
Pune, India, with an initial capital of US$ 250
• Signs up its first client, Data Basics Corporation, in New York

 1983
• Relocates corporate headquarters to Bangalore

 1987
• Opens first international office in Boston, US

 1993
• Introduces Employee Stock Options (ESOP) program
• Acquires ISO 9001/TickIT certification
• Goes public

 1994
• Moves corporate headquarters to Electronics City, Bangalore. Opens a
Development Center at Fremont

 1995
• Opens first European office in the UK and Global Development Centers
at Toronto and Mangalore. Sets up e-Business practice

 1996
• The Infosys Foundation is established
 1997
• Opens an office in Toronto, Canada
• Infosys is assessed at CMM Level 4

 1998
• Starts enterprise solutions (packaged applications) practice

 1999
• Touches revenues of US$ 100 million. Listed on NASDAQ
• Infosys becomes the 21st company in the world to achieve a CMM Level
5 certification
• Opens offices in Germany, Sweden, Belgium, Australia, and two
development centers in the US
• Infosys Business Consulting Services is launched

• Touches revenues of US$ 200 million
• Opens offices in France and Hong Kong, a global development center in
Canada and UK, and three development centers in the US
• Re-launches Banks 2000, the universal banking solution from Infosys, as

 2001
• Touches revenues of US$ 400 million. Opens offices in UAE and
Argentina, and a Development Center in Japan
• N. R. Narayana Murthy is rated among Time Magazine/CNN's 25 most
influential businessmen in the world
• Infosys is rated as the Best Employer by Business World/Hewitt

 2002
• Touches revenues of US$ 500 million
• Nandan M. Nilekani takes over as CEO from N.R. Narayana Murthy,
who is appointed Chairman and Chief Mentor
• Opens offices in The Netherlands, Singapore and Switzerland
• Sponsors secondary ADS offering
• Infosys and the Wharton School of the University of Pennsylvania set up
The Wharton Infosys Business Transformation Awards (WIBTA)
• Launches Progeon, offering business process outsourcing services

 2003
• Establishes subsidiaries in China and Australia
• Expands operations in Pune and China, and sets up a Development
Center in Thiruvananthapuram

 2004
• Revenues reach US$ 1 billion
• Infosys Consulting Inc. is launched

 2005
• Records the largest international equity offering of US$ 1 billion from
• Selected to the Global MAKE Hall of Fame

 2006
• Infosys celebrates 25 years. Revenues cross US$ 2 billion. Employees
grow to 50,000+
• N. R. Narayana Murthy retires from the services of the company on
turning 60. The Board of Directors appoints him as an Additional
Director. He continues as Chairman and Chief Mentor of Infosys

 2007
• Infosys crosses revenues of US$ 3 billion. Employees grow to over
• Kris Gopalakrishnan, COO, takes over as CEO. Nandan M. Nilekani is
appointed Co-Chairman of the Board of Directors
• Opens new subsidiary in Latin America
• Reports Q2 revenue of over US$ 1billion

 2008
• Infosys crosses revenues of US$ $ 4.18 billion. Employees grow to over
• Reports Q4 revenue of US$ 1,142 million

• Established in 1981, Infosys is a NASDAQ listed global consulting and

IT services company with more than 105,000 employees. From a capital
of US$ 250, we have grown to become a US$ 4 billion company with a
market capitalization of approximately US$ 27 billion.
• In our journey of over 28 years, we have catalyzed some of the major
changes that have led to India's emergence as the global destination for
software services talent. We pioneered the Global Delivery Model and
became the first IT Company from India to be listed on NASDAQ. Our
employee stock options program created some of India's first salaried

Profile of Infosys limited

• Infosys a Bangalore based company started in 1981 has

around 5,500 employs and hopes to double this figure to
10,000 till the end of year 2003(courtesyBusiiness India).
• The highest rated script on the Indian bourses - Infosys is
the most admired company on the BSE. It is the face of
the Indian software industry. The company was the first in
India to register on the American stock exchange -
NASDAQ with an issue of two million American Depository
Shares (ADR) that raised $70 million.
• As a part of Infosys globalization efforts the company has
set up a global development centre in Toronto. It also
established two proximity centers at Freemont, California
and Boston, Massachusetts. Infosys continues to expand in
Europe. In India the development centers are to be
opened at Mohali, Mangalore, Mysore, Hyderabad, Pune,
Chennai and Bhubhaneshwar.The companies top clients
include Nordstrom, Nortel and Goldman Sachs. Capital
One Services Inc., one of the largest issuers of credit
cards, is a new addition to the company's clientele. Infosys
was assessed at SEI-CMM Level 5 developed by the
Carnegie Mellon University. The company has pioneered
the Employee stock option plan(ESOP)in India. The
company has grown spectacularly with soaring profit
margins that stood at Rs.285 crore, up from 132 crore in
1998-99(courtesy Computers Today). Amongst its major
products are the banking soft wares popularly known as
Finnacle, Banc2000 and Bank Away?
• The company was also judged as the 5th best managed
company in Asia. The company's Chairman
Mr.N.R.Narayan Murthy was selected as one of the 50
most powerful people in Asia for the year 2000 in a poll
conducted by Asia week.
• The company provides a 3 month training to the new
recruits in Bangalore. There is also a service agreement
for an year. The pay package is around Rs.17,
000(approx.) for the year 2000 recruits.

Management team
Srinath Batni
Director and Head, Delivery Excellence

Rama Bijapurkar
Independent Director

K. Dinesh
Director and Head, Communication Design Group,
Information Systems and Quality and Productivity

Dr. Omkar Goswami

Independent Director

S. Gopalakrishnan
Chief Executive Officer and Managing Director

Sridhar Iyengar
Independent Director
N. R. Narayana Murthy
Chairman of the Board and Chief Mentor

Deepak M. Satwalekar
Lead Independent Director

T. V. Mohandas Pai
Director and Head, Finnacle, Admin, Human Resources,
Infosys Leadership Institute and Education and Research

Claude Smadja
Independent Director

S. D. Shibulal
Chief Operating Officer and Member of the Board

Dr. Marti G. Subrahmanyam

Independent Director

David L. Boyles
Independent Director

K. V. Kamath
Independent Director

Jeffrey Sean Lehman

Independent Director
Board of directors

V. Balakrishnan
Senior Vice President and Chief Financial Officer, Infosys

Subhash Dhar
Senior Vice President and Head, Global Sales, Alliances and

B. G. Srinivas
Senior Vice President, Manufacturing; Product Engineering;
Product Lifecycle and Engineering Solutions, Infosys
Chandra Shekar Kakal
Senior Vice President and Global Head, Enterprise Solutions,
Infosys Technologies

Ashok Vemuri
Senior Vice President and Global Head, Banking and Capital
Markets; Strategic Global Sourcing, Infosys Technologies

Amitabh Chaudhry
Chief Executive Officer and Managing Director, Infosys BPO

Head, Independent Validation Solutions, Infosys Technologies

M. D. Ranganath
Chief Risk Officer, Infosys Technologies

Prabhakar Devdas Mallya

Vice President and Head, Security Audit and Architecture,
Infosys Technologies

Dheeshjith V. G.
Head, New Markets and Services, Infosys Technologies
Member of the Board, Infosys Technologies, Australia and
Infosys Technologies, China
Subrahmanyam Goparaju
Vice President and Head, Software Engineering and
Technology Labs (SETLabs), Infosys Technologies

Nandita Gurjar
Senior Vice President and Group Head, Human Resources,
Infosys Technologies

Prasad Thrikutam
Senior Vice President and Head, Energy, Utilities and Services,
Infosys Technologies
Director, Infosys China

Suryaprakash K
Vice President, Information Systems, Infosys Technologies

Pravin Rao
Senior Vice President, Retail, Consumer Packaged Goods,
Logistics and Infrastructure Management Services, Infosys
Director, Infosys Australia

Jackie Korhonen
Managing Director and Chief Executive Officer, Infosys
Technologies, Australia & New Zealand
Raj Joshi
Director, Infosys Consulting

Trading chart of Infosys

• It's an ironic twist -- an Indian company shipping tech jobs to the U.S. --
but also a natural evolution, analysts said.
• Executives at Infosys, the second-largest Indian outsourcing firm, told
Dow Jones Newswires in India on Friday that the new subsidiary, called
Infosys Technologies Inc., will pursue government contracts for
information technology that one market research firm estimates will reach
$59.5 billion through 2012.
• "There is a lot of spending happening both at the federal and state levels,"
said chief financial officer V. Balakrishnan. "We don't want to miss that."
• Infosys did not return calls from The Dallas Morning News for additional
• The company declined to talk about how many people it will be hiring,
but one local analyst said the initial staff will probably number in the
hundreds and grow over time.
• "If you're going to have a service industry in the United States, Dallas is
one of the places you're going to have it," said Peter Bendor-Samuel,
chief executive of Everest Group, a Dallas-based outsourcing consulting
• He said the region's historic legacy in the outsourcing business -- dating
back to when Ross Perot founded the industry with Electronic Data
Systems Corp. in 1962 -- has produced the skilled workers that
companies like Infosys will need to thrive in the U.S.
• While it may seem odd that Indian firms are migrating some of their work
to the U.S. after years of American companies dispatching jobs to India,
Bendor-Samuel said being in-country is critical for landing government
• When it comes to landing health care business, many providers and
federal agencies are reluctant to send that work outside the U.S.
• And the law often requires that defense and homeland security contracts
be handled only by U.S. citizens.
• With growth in their traditional business segments slowing, Indian
companies like Infosys have no choice but to accommodate the
conditions set by the few segments that are growing.
• For example, Tata Consultancy Services, the largest Indian outsourcer,
recently expanded a facility in Cincinnati, while another Indian
outsourcer, Wipro, is hiring hundreds of workers in Atlanta.

Splits: 15-Feb-00 [2:1], 07-Jul-04 [2:1], 18-Jul-06 [2:1]

Last Trade: 53.20

Trade Time: 10:37AM ET
Change: 0.72 (1.37%)
Prev Close: 52.48
Open: 53.02
Bid: 53.18 x 300
Ask: 53.21 x 300
1y Target Est.:

Day's Range: 52.89 - 53.29

52wk Range: 22.61 - 53.13
Volume: 456,872
Avg Vol (3m): 1,838,120
Market Cap: N/A
P/E (ttm): N/A
EPS (ttm): N/A
Div & Yield: N/A (N/A)

Analysis of stock option on satyam computer and Infosys

Long term implied growth rates rank software near top of industry sectors

Growth Expectations Next 10 years

Housing Construction 0
Consumer Electronics
Electric Utilities percent
Consumer Financial Services
Consumer Goods
Healthcare Provider
Healthcare Payors
Data Communication Equipment
Internet Services


 Stock-Market Analysis
• Calculate the earnings per share (EPS) of a stock market series and the
expected P/E ratio (earnings multiplier) of a stock market series, using
the series’ expected dividend payout ratio, required rate of return, and
expected growth rate of dividends;
• Estimate and interpret the earnings multiplier of a stock market series,
explain changes in it, and calculate the expected rate of return for a
stock market series;
• Explain how the top-down approach can be used to analyze the
valuation of world stock markets.
 Industry Analysis
• Discuss the key components that should be included in an industry
analysis model;
• Illustrate the life cycle of a typical industry;
• Analyze the effects of business cycles on industry classification (i.e.,
growth, defensive, cyclical);
• Analyze the impact of external factors (e.g., technology, government,
foreign influences, demography, and social changes) on industries;
• Illustrate the inputs and methods used in preparing an industry
demand-and-supply analysis;
• Explain factors that affect industry pricing practices.
 Competitive Strategy: The Core Concepts
• Analyze the competitive advantage and competitive strategy of a
company and the competitive forces that affect the profitability of a
company and discuss the two fundamental questions determining the
choice of competitive strategy;
• Explain how competitive forces determine industry profitability;
• Analyze basic types of competitive advantage that a company can
possess and the generic strategies for achieving a competitive
advantage, analyze the risks associated with each of the generic
strategies, discuss the difficulties and risks of simultaneously using
more than one of the generic strategies, and discuss the difficulties in
sustaining a competitive advantage with any generic strategy;
• Explain the role of a generic strategy in the strategic planning process.
 Company Analysis and Stock Valuation
• Differentiate between 1) a growth company and a growth stock, 2) a
defensive company and a defensive stock, 3) a cyclical company and a
cyclical stock, and 4) a speculative company and a speculative stock;
• Describe and estimate the expected earnings per share (EPS) and
earnings multiplier for a company;
• Calculate and compare the expected rate of return based on the
estimate of intrinsic value to the required rate of return;
• Describe the elements of a franchise P/E;
• Describe how an analyst can use the growth duration model to
determine whether a firm’s P/E ratio is justified and describe the
factors to consider when using the growth duration technique to imply
a company’s P/E.
 The Equity Valuation Process
• Define valuation and discuss the uses of valuation models;
• Contrast quantitative and qualitative factors in valuation;
• Discuss the importance of quality of inputs in valuation;
• Discuss the importance of the interpretation of footnotes to accounting
statements and other disclosures;
• Calculate alpha;
• Contrast the going-concern and non-going-concern assumptions in
• Contrast absolute valuation models to relative valuation models;
• Discuss the role of ownership perspective in valuation.
 Discounted Dividend Valuation
• Discuss the advantages and disadvantages of dividends, free cash
flow, and residual income as measures of cash flow in discounted cash
flow valuation, and identify the investment situation for which each
measure is suitable;
• Determine the circumstances in which a dividend discount model
(DDM) is appropriate for valuing a stock;
• Explain the capital asset pricing model (CAPM), arbitrage pricing
theory (APT), and bond yield plus risk premium approaches for
estimating the required rate of return for an equity investment, and
calculate the required rate of return using each approach;
• Estimate the Gordon growth model equity risk premium;
• Discuss the limitations of using the CAPM and APT to estimate the
required return on equity;
• Calculate the expected holding-period return on a stock, given its
current price, expected next-period price, and expected next-period
dividend and contrast the expected holding-period return to the
required rate of return;
• Discuss the effect on expected return of the convergence of price to
value, given that price does not equal value;
• Calculate the value of a common stock using the DDM for one-, two-,
and multiple-period holding periods;
• Calculate the value of a common stock using the Gordon growth
model, and explain the underlying assumptions;
• Calculate justified leading and trailing price-to-earnings (P/E) ratios
based on fundamentals, using the Gordon growth model;
• Calculate the value of fixed-rate perpetual preferred stock, given the
stock’s annual dividend and the discount rate;
• Calculate the present value of growth opportunities (PVGO), given
current earnings per share, the required rate of return, and the value of
the stock;
• Explain the strengths and limitations of the Gordon growth model, and
justify the selection of the Gordon growth model to value a company,
given the characteristics of the company being valued;
• Explain the assumptions and justify the selection of the two-stage
DDM, the H-model, the three-stage DDM, or spreadsheet modeling;
• Explain the growth phase, transitional phase, and maturity phase of a
• Explain terminal value and discuss alternative approaches to
determining the terminal value in a discounted dividend model;
• Calculate the value of a common stock using the two-stage DDM, the
H-model, and the three-stage DDM;
• Explain how to estimate the implied expected rate of return for any
DDM, including the two-stage DDM, the H-model, the three-stage
DDM, and the spreadsheet model and calculate the implied expected
rate of return for the H-model and a general two-stage model;
• Explain the strengths and limitations of the two-stage DDM, the H-
model, the three-stage DDM, and the spreadsheet model;
• Define sustainable growth rate and explain the underlying
assumptions and calculate and interpret the sustainable growth rate for
a company;
• Estimate, using the DuPont model, a forecast for return on equity that
can be used to estimate a company’s sustainable growth rate.
 Free Cash Flow Valuation
• Define and interpret free cash flow to the firm (FCFF) and free cash
flow to equity (FCFE);
• Describe the FCFF and FCFE approaches to valuation, and contrast
the appropriate discount rates for each model and explain the strengths
and limitations of the FCFE model;
• Contrast the ownership perspective implicit in the FCFE approach to
the ownership perspective implicit in the dividend discount approach;
• Discuss the appropriate adjustments to net income, earnings before
interest and taxes (EBIT), earnings before interest, taxes, depreciation,
and amortization (EBITDA), or cash flow from operations (CFO) to
calculate FCFF and FCFE;
• Calculate FCFF and FCFE given a company’s financial statements
prepared according to U.S. GAAP or International Accounting
• Discuss approaches for forecasting FCFF and FCFE;
• Contrast the recognition of value in the FCFE model to the
recognition of value in dividend discount models;
• Explain how dividends, share repurchases, share issues, and changes
in leverage may affect FCFF and FCFE;
• Critique the use of net income and EBITDA as proxies for cash flow
in valuation;
• Discuss the single-stage (stable-growth), two-stage, and three-stage
FCFF and FCFE models (including assumptions), and explain the
company characteristics that would justify the use of each model;
• Calculate the value of a company using the single-stage, two-stage,
and three-stage FCFF and FCFE models;
• Explain how sensitivity analysis can be used in FCFF and FCFE
• Discuss the approaches for calculating the terminal value in a multi-
stage valuation model;
• Describe the characteristics of companies for which the FCFF model
is preferred to the FCFE model.
 Market-Based Valuation: Price Multiples
• Distinguish between the method of comparables and the method based
on forecasted fundamentals as approaches to using price multiples in
valuation, and discuss the economic rationales for each approach;
• Define a justified price multiple;
• Discuss rationales for using each price multiple and dividend yield in
valuation, discuss possible drawbacks to the use of each price multiple
and dividend yield, and calculate each price multiple and dividend
• Calculate underlying earnings given earnings per share (EPS) and
nonrecurring items in the income statement and discuss the methods
of normalizing EPS, and calculate normalized EPS by each method;
• Explain and justify the use of earnings yield (E/P);
• Discuss the fundamental factors that influence each price multiple and
dividend yield; g) calculate the justified price-to-earnings ratio (P/E),
price-to-book ratio (P/B), and price-to-sales ratio (P/S) for a stock,
based on forecasted fundamentals;
• Calculate a predicted P/E, given a cross-sectional regression on
fundamentals, and explain limitations to the cross-sectional regression
• Define the benchmark value of a multiple;
• Evaluate a stock by the method of comparables using each of the price
multiples and explain the importance of fundamentals in using the
method of comparables;
• Calculate the P/E-to-growth ratio (PEG), and explain its use in relative
• Calculate and explain the use of price multiples in determining
terminal value in a multi-stage discounted cash flow (DCF) model;
• Discuss alternative definitions of cash flow used in price multiples,
and explain the limitations of each definition;
• Discuss the sources of differences in cross-border valuation
• Describe the main types of momentum indicators and their use in
 Residual Income Valuation
• Calculate and interpret residual income and describe and calculate
alternative measures of residual earnings (i.e., economic value added,
market value added);
• Discuss the uses of residual income models;
• Calculate future values of residual income, given current book value,
consensus earnings growth estimates, and an assumed dividend payout
ratio and calculate the intrinsic value of a share of common stock
using the residual income model;
• Contrast the recognition of value in the residual income model to
value recognition in other present value models, discuss the strengths
and weaknesses of the residual income model, and justify the choice
of the residual income model for equity valuation, given
characteristics of the company being valued;
• Discuss the fundamental determinants or drivers of residual income;
• Explain the relationship between residual income valuation and the
justified price-to-book ratio based on forecasted fundamentals;
• Explain the relationship of the residual income model to the dividend
discount model and the free cash flow to equity model;
• Discuss the major accounting issues in applying residual income
• Calculate an implied growth rate in residual income, given the market
price-to-book ratio and an estimate of the required rate of return on
• Define continuing residual income and list the common assumptions
regarding continuing residual income;
• Justify an estimate of continuing residual income at the earnings
forecast horizon, given company and industry prospects;
• Calculate and interpret the intrinsic value of a share of common stock
using a single-stage residual income model;
• Calculate and interpret the intrinsic value of a share of common stock
using a multi-stage residual income model, given the required rate of
return, forecasted earnings per share over a finite horizon, and
forecasted continuing residual earnings.

We have already identified the problem in Satyam Computer Services and our
research shows the problem is also present in most of the other business houses
in India. Clearly, the problem is abuse of corporate governance by dominant
shareholder and it can be solved by disciplining the dominant shareholder. The
regulator (the company law administration as well as the securities regulator for
example SEBI) and the capital market can play an important role in preventing
the Satyam scandal happens again.
With time Software export from India was becoming more attractive.
Companies in Indian Information Technology industry were trying to change
their focus to exploit this opportunity. Software opportunities were de-linked
from the hardware manufacturers in 1970 by IBM. Firms that were joint
ventures between Indian counterpart and a foreign hardware technology leader
also realized the software development competence that India had. With large
number of English speaking technical graduates it was easier to make money in
software business in India than hardware business. Especially the Indian
counterpart was more eager to change over to the software service export
business like Tata Unisys. This change in the strategic environment caused by
the technology change was “Radical” in the sense that they made the old skills
and capabilities obsolete and demanded the firms to make substantial
investment for negotiating this change. These changes made the incumbent
firms inefficient and favored new entrants with software export focus. The
change process got delayed in case of joint ventures as changes were not win-
win for both the partners. Incumbent JV firms continued to use second best
solution in the changed environment which was agreeable to both the partners.
They tried to go into software business slowly. In a market place characterized
by high competition these incumbent JV firms started lagging the software
export focused entrant’s performance. These Incumbent JVs either went out of
market or made the investment to negotiate the change very late. By this time
they hade lost the market leadership to the new entrants (Christensen, 1997).


Description of live experience

I was supposed to use the database provided by the company to make cold calls

or by directly meeting people to get new leads.

While making cold calls, we need to have:

• Good Communication Skills (Voice quality is clear and articulate)

• Persistent and able to bounce back from rejection

• Good organizational skills.

• Ability to project a telephone personality (Enthusiasm, friendliness)

• Flexibility: can adapt to different types of clients and new situations.

Using a good database is very essential.
“Eighty percent of our business comes from 20 percent of our customers" is a
frequent statement at any sales convention. There's hardly a sales executive who
is not aware of the 80/20 rule”.
While talking to customers, I analyze their needs. Whether they want to go for
investment purpose or insurance or both. Suggest them the plan that best suits
them. If they agree to it then either we send across the agents to close the deal
or close it themselves.

Problems faced while selling products:

• Customer dissatisfied with the services.

• People fear that Reliance Money Being a Private company and a new

entrant may be able to sustain or not.

• Insurance means LIC for people.

• Past experience, word of mouth.

• Misguidance by agents.

• People do not want insurance products.

• Lack of knowledge and awareness about general and life insurance.

• People risk appetite is very low, so they are afraid of mutual fund as well.

• People relate the problems of mobile phones of Reliance Communication



Weakness Strength

• Inexperienced Staff • Co-operative and

• Low awareness due to Experienced Branch
lack of advertisement. Managers
• Lack of loyal clientage • Good Database
• Developing product. • Reliance Brand
• Low pricing
Opportunity Threat

• Untapped Market • Reach

• Increased spending • Stiff competition from
power existing players in the
• Changing Mindset of market
Customers • Better products
• Unpredictable Sensex

Based on the findings of our project we would like to suggest the following:-

• After sales services and follow up calls are important for getting new

references so trained telesales should be appointed for this purpose whose sole

work should be to make feedback calls.

• Investsmrt is having too many financial products right from Demat

account to General Insurance and not all the salespeople are familiar with each

and every product so the work force should be segregated each group dealing in

a specific product and the sales target should be given likewise.

• While interacting with the investors I found that most of the customers

are unaware about the Mutual fund. Some of the people look upon mutual funds

and equity trading as gambling. Thus a mutual fund awareness program can

help to increase the penetration of mutual funds in the market.

• Money multiplier should declare in black ink that they will charge just 5

paisa per transaction. People tend to think that there must be some hidden

• Rs950 account opening charges are too high when targeting a corporate

so the company should be flexible on this amount.

• Money Multiplier should provide periodic training for updating the

product knowledge of various financial advisors.

• Company should have a scheme of rewards and recognition to employees

and the field persons to boost their motivation.


Based on the above SWOT analysis and study of the available data I have

come to the following conclusions:


• All though relatively new entrants in the market, Money Multiplier is

slowly but surely gaining a strong hold because it is finally able to grasp the

investment climate in Vadodara. Secondly the branch managers at all the

branches are very knowledgeable with a lot of experience in the financial

markets so under their leadership can definitely expand its base

• The entire workforce consists of mostly youngsters, which means they

can be encouraged and motivated to do good work because they have a long

way to go and most of them are eager to climb the ladder.

• Right now Reliance is at its nascent stage and will surely grab the major

market under its belt very soon like in other fields.

Huge investments taking place:

• The Stock Market has been very buoyant until now especially in the past

3 years. This particular trend is very favorable because a soaring SENSEX

means higher returns, which encourages the investors to invest their money in

the market. Although in the past 3 months the market has shown very

unpredictable trend and has already lost over 1000 points.

• So in order to make the best the only thing required is to recruit more

field staff who should be trained in a proper way to get better results.

• In case of insurance, it requires push selling because people always

associate it with emergencies and unpleasant situations like death and they don’t

want to think about such situation let alone prepare for them, which means it

requires a lot of conviction on part of the executives.

Large untapped market:

• People have just opened up to the idea of ULIPs because till now they

knew only two kinds of insurance plans, endowment and term plans so the

concept of high returns with protection is very new to them and slowly and

slowly these are becoming popular so there is a huge market waiting to be


• In the past few years there has been a tremendous inflow of funds in the

Indian market which has lead to the sky rocketing SENSEX. In fact there has

been a tremendous response from the investors not only in shares. Equity

market is an example of the growing trust of investors who earlier shied from

such investments due to stock market fiascos like the Harshad Mehta scam or

the US64 disaster in which investors lost huge amounts of money as well as

their trust in financial instruments.

• With the FDI limits being relaxed, a lot of avenues will open up in the

insurance sector and insurance companies are expected to come up with new

plans with a great deal of customization and flexibility.


1. Cold Calling

• Voice and accent plays a major role.

• The right time to call a customer cannot be decided, as the customer may

in a different mood at the time of calling.

• Time consuming

• Less success rate

2. Corporate

• Time consuming

• Contacts with higher authorities play a major role


1. Preference of Investment

Result of Preference of Investment

Interpretation: This shows that although the mutual funds market is on the rise

yet, the most favored investment continues to be in the Share Market. So, with a

more transparent system, investment in the Stock Market can definitely be


2. Awareness on Online Share Trading

Result of Awareness of Online Share Trading

Interpretation: With the increase in cyber education, the awareness towards

online share trading has increased by leaps and bounds. This awareness is

expected to increase further with the increase in Internet education.

3. Awareness of IL&FS Invest smart as a Brand

Result of Awareness of Reliance money as a Brand

Interpretation: This pie-chart shows that reliance money has a reasonable

amount of Brand awareness in terms of a premier Retail stock broking

company. This brand image should be further leveraged by the company to

increase its market share over its competitors.

4. Relience money Facilities

Result of Awareness of Reliance money Facilities

Interpretation: Although there is sufficiently high brand equity among the

target audience yet, it is to be noted that the customers are not aware of the

facilities provided by the company meaning thereby, that, the company should

concentrate more towards promotional tools and increase its focus on product

awareness rather than brand awareness.

5. Satisfaction Level among Customers with current broker

Result of satisfaction level among customers with current

Interpretation: This pie-chart corroborate the fact that Strategic
marketing, today, has gone beyond only meeting Sales targets and generating
profit volumes. It shows that all the competitors are striving hard not only to
woo the customers but also to make them Brand loyal by generating customer

6. Frequency of Trading

Result of Frequency of

Interpretation: Inspite of the huge returns that the share market promises, we

see that there is still a dearth of active traders and investors. This is because of

the non – transparent structure of the Indian share market and the skepticism of

the target audience that is generated by the volatility of the stock market. It

requires efficient bureaucratic intervention on the part of the Government.

7. Percentage of earnings invested in Share Trading

Result of percentage of earning invested in share

Interpretation: This shows that people invest only upto 10% of their
earnings in the stock market, again reiterating the volatile and non-transparent
structure of the Indian stock market. Hence, effective and efficient steps should
be undertaken to woo the customers to invest more in the lucrative stock


Q1. In which of these Financial Instruments do you invest into?

Shares Mutual Funds Bonds Derivatives

Q2. Are you aware of online Share trading?

Yes No

Q3. Heard about Money Multiplier?

Yes No

Q4. Do you know about the facilities provided by Money Multiplier?

Yes No

Q4. Do you know about the facilities provided by Money Multiplier?

Yes No

Q5. With which company do you have your DEMAT account?

Reliance money ICICI Direct IL&FS INVESTSMART

Money Multiplier

Others (please specify)

Q6. What differentiates your Share trading company from others? (in
regards of brokerage, satisfaction, services, products )

Q7. Are you currently satisfied with your Share trading company?

Yes No
Q8. How often do you trade?

Daily Weekly Monthly Yearly

Q9. What percentage of your earnings do you invest in share trading?

Up to 10% Up to 25% Up to 50% Above 50%

Q13. How do you rate these share trading companies?

a. Reliance money
1. 2. 3. b. ICICI Direct
c. Money Multiplier
4. 5. e. Others (Please

Q14. What more facilities do you think you require with your DEMAT


Name :
Age :

Sex : Male Female

Phone No :

















No objection certificate