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SATYAM

SCA
M
"SINKING SHIP OR
TIP OF ICEBERG"

Company Profile
Set up 1987 to provide
services in IT sector.
Indias 4th biggest software
company.
Chairman and founder B.
Ramalinga Raju.
On 26th August, 1991 it was
converted into a Public Limited
Company and went for PUBLIC
ISSUE in 1992.

Company Profile
BSE IPO oversubscribed 17 times
when made public.
It is listed in BSE, NSE, NYSE and
Euronext (Amsterdam).
The company employs 53,000 IT
professionals across development
centers in 6 continents.
It serves over 654 global
companies, 185 of which are
Fortune 500 corporations.

ACHIEVEMENTS

First IT Company in the World Certified under ISO9001:2000


Ranked Among Indias Top 10 Best Employers, 2004 and 2003
Top 13 Best-Managed Companies in India.
Corporate Citizen award for Corporate Social Responsibility.
SAP Pinnacle Award 2008.
Satyam Wins golden peacock award for excellence in Corporate
Governance on Global level for 2nd time.
United Kingdom Trade and Investment India Business Award
for Corporate Social Responsibility

Satyam Clients
A total of 650+
Clients
185 of the top
fortune 500
Companies

Satyam Board Structure


B.Rama Raju
Promoter &
CEO

Other
Independe
nt
Directors

B.Ramalinga
Raju
Promoter &
Chairman

Ram
Mynampati
Whole time
Executive
Director

Dr M.
Srinivasa
n

GTB/Dr.
Reddys
Laboratorie
s

Srinivas
Vadlamani
Chief Financial
Officer

Prof.
Krishna G
Palepu

Mr. Vinod K
Dham

Sasken Communication/
Hellsoft /Montalvo
Systems and Newpath

Prof. M
Rammoha
n Rao

ISB Dean/
Bharat
electronics

Mr. T R
Prasad

Prof. V S
Raju

Former
CabinetSecretary
/GMR Infra/ GVK Taj

Satyam Share holding


Pattern
Institutional & NonInstitutional
Shareholders

Total Market capitalization


was Rs. 15,262 Cr
(still Dec 16, 2008 )

LIC
4.34%
L&T
4%
Lazard
Aberdeen
13.16%
Fidelity
ICICI Prudential
Citigroup
JP Morgan

o Announcement to acquire 2
group
firms
owned
by
Chairman Ramalinga Raju's
sons.
o 51% stake in Maytas
Infrastructure and 100 % in
Maytas Properties.
o US $ 1.3 billion - Maytas
Properties and US$ 0.3 billion
- Maytas Infra.
o Total outflow for both the
acquisitions was expected to

So, How did it all begin?

Time-Line
16 Dec
2008

17 Dec
2008

Satyam gets board


approval for
controlling stake in
Maytas Infrastructure
and Maytas
properties as fully
owned subsidiary for
$1.6B (Rs. 8000 Cr.)

26 Jan
2009

Satyam backs out of


Maytas deal citing
investors protest
Major Clients of
Satyam express
dissatisfaction.
Contracts worth
$200 million up for
grabs
Satyam shares plunge
55 percent in NYSE.
BSE share plunges over
30%

Board meeting to be
held on Dec 29 for
proposed buyback of
shares

Time-Line
19
Dec

20
23
Dec Dec

British mobile solution


provider Upaid files a
law suit against Satyam
in a district Court in the
US over Maytas deal.
May face $1 Billion in
penalties
Centre refers
Satyam deal
to Registrar of
Companies
(RoC)

206Jan
2009

World Bank bans Satyam for 8


years due to inappropriate
payments to staff and
inability to provide
information sought on
invoices

Time-Line
26 28 29
Dec Dec Dec

1st independent
director Dr.
Mangalam
Srinivasan
resigns from
Satyam board
Satyam objects
to world bank
statements,
asks to
apologies or
face legal action

Board meet initially


scheduled for 29th
postponed to 10th
January
Board announces
exploring option
for buyback of
shares to restore
investor
confidence

26 Jan
2009

3 more Independent Directors resign.


Mendu Rammohan Rao, Krishna G
Palepu and Vinod K Dham

Satyam asks DSP


to review board
structure

Promoters disclose that


their entire holding in
Satyam pledged with
institutional lenders since
2006

Rumors in market
about strategic
takeover by IBM,
Accenture

IL&FS sells 44.1 lakh shares


pledged shares of Satyam
promoters in 1 day.
Promoters equity reduced
from 8.6% to aprrox 7%

Time-Line
30 02 03
Dec Jan Jan

Post cancellation
of deal, Maytas
looks for raising
$500 million
through sale of
equities and
properties

IL&FS sells
further 44.27 Lakh
pledged shares
taking the tally to
1.5 crore pledged
shares
Satyam-Upaid
case hearing over
the Maytas deal in
Texas court on
January 8.

26 Jan
2009

Satyam board confirms


promoters stake to be
around 5%. Further 3.2% still
pledged.

Time-Line
05 06
Jan Jan

Promoters
stake in the
company down
to 4.5%
SEBI considers
proposal to make it
mandatory for
promoters and
majority share
holders to disclosed
pledged shares to
stock exchange

Total pledged shares sold by


IL&FS reaches 2.5 Cr. in last
13 days. Promoters stake
down to 3.6%. Still a further
1.7% are pledged
The Night Before 7th Jan
Merill Lynch discovers serious
irregularities in books of
accounts and approaches
regulator SEBI for further
course of action and its inability
to investigate further. DSP
submits report to SEBI and
Satyam management late night.

26 Jan
2009

Tech Mahindra
(Revenues 3766 Cr.)
offers to merge with
Satyam (Revenues 8473
Cr.)

Time-Line
07
Jan

09:45 A.M.
Satyam Chairman
Ramalinga Raju
wrote letter to the
company board

Auditing firm PWC


under scanner

Govt. instructs RoC


to review report

ADRs crash 90%


Satyam BSE scrip falls
78%
DSP snaps ties with
satyam.
Ram Mynampati
takes over as
interim CEO
according to Rajus
letter

26 Jan
2009

Hunt for Raju


brothers begin.
Amid speculation
over his
whereabouts, Raju is
believed to have left
for the United States
in connection with a
court case.
Satyam stripped of
Golden Peacock
award

NSE removes Satyamfrom its benchmark index


Nifty.

Time-Line
08
09
Jan Jan

10
Jan

26 Jan
2009

BSE to replace
Satyam Computer
Former CFO
with Sun
Valdamani
Pharmaceutical in
Srinivas
its benchmark
remanded to
index Sensex with
judicial custody
effect from January
CFO Valdamani
12.
Raju brothers arrested by the
Srinivas, who is the
police on charges of criminal
financial custodian
conspiracy, cheating, forgery,
of the company
misappropriation of funds and
resigns
criminal breach of trust.
PwC shot back at Satyam,
saying in a media statement
Market Capitalization of satyam falls to Rs.
that the auditing was based
1,607 Cr from Rs.15,262 Cr. on Dec 16 in 19
on the audit evidence
trading sessions.
provided by Satyam and in
was accordance with
PwC in major
trouble. Stocks
of PwC clients
take a major
beating at the
BSE and NSE

Time-Line
13
14 15 16
Jan Jan Jan Jan

Government
hands satyam
case to SFIO

The newly appointed 3


member board appoints
auditing firm KPMG and
Delloitte to assist it in
cleaning the mess in the
scam tainted companys
accounts

23 year old
employee of
satyam
commits suicide
in Chennai

26 Jan
2009

Maytas stocks
hit the lower
circuit for 7th
consecutive
trading session

The government expanded the


three-member Satyamboard to six
to include S Balakrishnan of Life
Insurance Corporation, Tarun Das,
chief mentor of the Confederation
of Indian Industry and T N
Manoharan, former president of the
Institute of Chartered Accountants
of India

STOCK CHARTING

Fabricated Income Statements

Creative Account
Practice

Details of cash balances with Scheduled banks are not


there in the
Annual report

UNDERSTATE
D LIABILITY
1230 Cr.
Which was
ARRANGED
BY MR.RAJU

Overstated cash
balances,
Income
receivables

Understated
Liabilities

Fraud Amount

SATYAM Meaning
TRUTH.
Now, Satyam :A Rs. 7000 cr
LIE.

o Pressure
to improve the
company's performance.
o Capture market.
o Achieve billion dollar sales mark.
o It was like riding a

tiger, not knowing how


to get off without being
eaten.

Impact of Scam
Stock Market

Employees

Share - Holders

Indian Economy

Stake - Holders

Regulators investigating Satyam include

Action Taken By Authorities


Chartered accountants body ICAI constituted a six-member special committee to look into the auditing of crisis-hit Satyam Computer and will
submit its auditing report on February, 11.
The special committee will headed by ICAI Vice-President Uttam Prakash Aggarwal .
ICAI council members
S L Dogra, Amarjeet Chopra;
Subodh Aggarwal ;
Akshay Gupta ;&
K R Maheshwari, a banker and chartered accountant.
Government asked the Serious Frauds Investigation Office (SFIO)-- a body set up to crack complex white collar crimes-- to probe the financial
irregularities in Satyam Computer Services and report its findings in three months.
This decision to refer Satyam to SFIO is based on the recommendation of the Registrar of Companies (RoC) in Hyderabad, who inspected the
books of Satyam which were being fudged for the past 7 years.
Raju was arrested on charges of cheating, fraud and and other criminal charges under various sections of Indian Penal Code (IPC).
The Securities and Exchange Board of India (SEBI) officials came to Hyderabad to investigate the entire scam, but they could not do so as Raju
was in the custody of CID.
The former chief executive officer (CEO) of Satyam Computers, Raju and his younger brother Rama Raju were remanded to judicial custody by
sixth additional Metropolitan magistrate for 14 days (ie till January 23) and both were shifted to Chanchalguda Central Jail near the city.

Liquidating assets and bringing in new investors.

DELOITTE and KPMG has been appointed as independent


auditors to help restate the companys financial reports.

Government superseded the board of Satyam and decided to


appoint 10 nominee-directors.

DEEPAK PAREKH set to be appointed Chairman (Chairman of


HDFC ltd and HDFC bank), KIRAN KARNIK and CACHUTAN (legal
expert).

3 members of BCG has been appointed as a management


advisor and is working to revive satyam.

TARUN DASS (CII Mentor), TN MANOHARAN (former president of


ICAI) and SB MAINAK are among other 3 board members
appointed by the Government.

Satyam board has appointed GOLDMAN SACHS & AVENDUS as


its Investment Bankers.

Why Govt. Mediated

Govt. of India was very concerned about its


Image in International Market especially IT ,
as it is also main source of foreign exchange
for the country and drives economic growth
of a country.

To safeguard the Interest of small investors,


So that faith can be restored in the market
again.

To take care of the employees working in


Satyam. As it was never their fault for
whatever happened. Their job has to be
secured by the Govt. that too in economic
recession time.

Steps Taken After Satyam


Fraud

Introduction of new rules by the stock market regulator,


making it compulsory for promoters of companies to
disclose the percentage of shares pledged by them to
lenders

Appointment of Independent Auditors and Company


Secretary by Company Law Board to conduct Audit of any
private organization and time.

Set-up of 5 member Committee to suggest how to


implement effective compliance and Corporate Governance
in private sector by CLB.

Finally Satyam acquired by


tech mahindra.
Anand Mahindra, Chairman, Tech Mahindra, the new
owner of Satyam, company post the Rs 2,890-crore
takeover, giving hope and future to Satyams 45,00050,000 employees. A moment of truth for Satyam and a
victory for the government and the regulators.

Raju Raju sat on the wall,


Raju Raju had a great fall,
Balance sheet died,
Shareholders cried,
Raju Raju made a fraud.

B. Ramalinga Raju
Founder & Chairman, Satyam
Computers Ltd.

Raju Raju
Yes Baba,
Cheating us
No Baba,
Telling Lies
No Baba,
Open the balance
sheet
HA! HA! HA!

Thank
You !
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Thank You !