Satyam Computers

Presented by-

Vaibhav Rai Siddharth Jain Swapnil Singh Tomar Poornima Singh Neha Dua Praveen Kumar Priya Tomar Sanidhya Girolkar Rajat Kumar Singh Deo Shashank Gupta Anita Yadav

INTRODUCTION
y Set up in the year 1987 to provide
services in IT sector. company in India.
 First IT Company in the

y India s 4th biggest software y It is listed in BSE, NSE, NYSE and

Euronext (Amsterdam).

y BSE IPO oversubscribed 17 times y The company employs 53,000 IT

when made public in the year 1991. professionals across development centers in 6 continents.

World Certified under ISO9001:2000.  Ranked Among India s Top 10 Best Employers, 2004 and 2003.  Top 13 Best-Managed Companies in India.  Winner, Corporate Citizen I 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.

Continued..
y The company was promoted by 2 brothers B Rama Raju and B Ramalinga
Raju.

y On 26th August, 1991 it was converted into a Public Limited Company

and went for PUBLIC ISSUE in 1992.

y Satyam headquater is situated in Hyderabad. y During the year 1996 company promoted 4 subsidiaries:
Satyam Renaissance Consulting Ltd. Satyam Enterprise Solutions Pvt. Ltd. Satyam Infoway Pvt. Ltd (e-commerce) and Satyam Spark Solutions Pvt. Ltd. (software's)

Continued..
y In 2001, The American depositary shares (ADS) of Satyam
Computer Services on May 16 was listed at .16 $ on the New York Stock Exchange (NYSE) at a premium of 14.9 per cent to the offer price.

y Satyam became the worlds first ISO-9001:2000 certified IT

company.

y During 2002, Satyam Computer Launched operations in China.

Providing internet in India

y In the year 1999, Satyam Infoway Ltd, became the second
largest Internet services provider in India based on the number of customers.

y Satyam Infoway (sify) is the first Indian Internet company

listed on NASDAQ.

y The

Company launched (www.sifymall.com).

its

shopping

channel

as

> Chairman and founder Satyam Computers Services Limited. > MBA from Ohio University. > IT man of the year award by Data Quest in 2002. > Winner of Ernst & Young entrepreneur of the year award in 2007.

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

B. Rama Raju Promoter & CEO, Satyam Computers Ltd.

> He became the Managing Director and Chief Executive Officer in 1991. > Mr. Rama Raju holds a MBA degree from Loredo State University, Texas. > Before 1997, he was with Maytas Infra Limited as one of its Directors.

Satyam Share holding Pattern

Total Market capitalization of Rs. 15,262 Cr (As on Dec 16, 2008 )

Mr. Teja Raju (VC)

Maytas Infrastructure

y The company is run by the sons of Ramalinga Raju. y It was started in the late 1980s by Ramalinga Raju. y The main reason for the debacle of Maytas Infra is due to the
debacle of Satyam.

y Raju s hold 36.64 per cent while institutional holding is 10.92

per cent.

y The company had raised Rs 327.45 crore through IPO. y It had a turnover of Rs 1,660 crore and net profit of Rs 100 crore
in the last financial year.

y Satyam planned to acquire 51 per cent stake for Rs 1, 440 crore or

$0.3 billion.

Maytas Properties
B. Rama Raju Jr. (VC)

y Raju s family owns 35% of Maytas properties. y Founded in 2005, it has a land bank of 6,800 acres. y It has clearances for three IT SEZs based on 148 acres. y An undisclosed stake is held by Infinite India Investment
Management, a realty fund jointly promoted by JM Financial and USbased SRM Investments, which invested Rs 600 crores in February.

Controversies
y y y y

Maytas acquisition World Bank Upaid lawsuit Accounting scandal of 2009

So, How did it all begun?

21 April 2008 22 Sep 2008

26 Jan 2009

2006

Satyam revenues cross $1 Billion

Satyam becomes first Indian company to publish IFRS audited financials

Satyam receives the Golden Peacock Award for excellence in Corporate Governance from World council

16 Dec 2008

17 Dec 2008

26 Jan 2009

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

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

19 Dec

20 23 Dec Dec

26Jan 2009

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)

World Bank bans Satyam for 8 years due to inappropriate payments to staff and inability to provide information sought on invoices

26 28 29 Dec Dec Dec

26 Jan 2009

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

3 more Independent Directors resign. Mendu Rammohan Rao, Krishna G Palepu and Vinod K Dham

Satyam asks DSP to review board structure

Rumors in market about strategic takeover by IBM, Accenture

Promoters disclose that their entire holding in Satyam pledged with institutional lenders since 2006

IL&FS sells 44.1 lakh shares pledged shares of Satyam promoters in 1 day. Promoters equity reduced from 8.6% to aprrox 7%

30 02 03 Dec Jan Jan

26 Jan 2009

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.

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

05 06 Jan Jan

26 Jan 2009

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.

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

07 Jan

26 Jan 2009

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

ADR s crash 90% Satyam BSE scrip falls 78% DSP snaps ties with satyam. Ram Mynampati takes over as interim CEO according to Raju s letter

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

Auditing firm PWC under scanner Govt. instructs RoC to review report

NSE removes Satyam from its benchmark index Nifty. It will be replaced by Reliance Capital with effect from January 12. It will also be removed from various other indices like CNX 100, S&P CNX 500,CNX IT and the CNX Services sector index

08 09 Jan Jan

10 Jan

26 Jan 2009

PwC in major trouble. Stocks of PwC clients take a major beating at the BSE and NSE CFO Valdamani Srinivas, who is the financial custodian of the company resigns

BSE to replace Satyam Computer with Sun Pharmaceutical in its benchmark index Sensex with effect from January 12.

Former CFO Valdamani Srinivas remanded to judicial custody

PwC shot back at Satyam, saying in a media statement that the auditing was based on the audit evidence provided by Satyam and in was accordance with applicable standards.

Raju brothers arrested by the police on charges of criminal conspiracy, cheating, forgery, misappropriation of funds and criminal breach of trust. Market Capitalization of satyam falls to Rs. 1,607 Cr from Rs.15,262 Cr. on Dec 16 in 19 trading sessions.

13 14 15 16 Jan Jan Jan Jan

26 Jan 2009

Government hands satyam case to SFIO

23 year old employee of satyam commits suicide in Chennai

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

The newly appointed 3 member board appoints auditing firm KPMG and Delloitte to assist it in cleaning the mess in the scam tainted company s accounts

The government expanded the threemember Satyam board 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

Why on

th 7

Jan 2009?

y DSP Merrill Lynch informed SEBI about Material

irregularities in Accounts on 6th Jan.

y Minutes of Meeting of 16th December,2008 were not

submitted to RoC-(This created some doubts).

y Hearing of Upaid- satyam case on 8th Jan at the US court.

Fabricated Income Statements

Creative Account Practice

Details of cash balances with Scheduled banks are not there in the Annual report Question raised by Equity analyst Kawaljeet Saluja -$500 mn cash parked in current account

5,040 + 376 + 470 (Rs. Cr)

Rs. 1,230 Cr

Rs. 7,136 Cr
Fraud Amount

Understated Liabilities Overstated cash balances, Income receivables

Why and How ????

Investment in Real estate (Land Banks)

To keep EPS high

Sold his stake at inflated price (Made Rs.2,065 cr from shares)

STOCK CHARTING

y PWC had been auditing satyams balance sheet since year

2000.

y Companies have to keep bank statements for the current and

preceding years at registered offices. It is suspected that the files vanished as they would have given away the fraud.

What Management could do??

y Change the name of the company. y Reconstitution of the board :Restore the management of the company and appoint some reputed people as the board of directors. Try building confidence in the clients to get back the lost projects. The image of the company could be revived by a series of press conferences highlighting the ongoing contracts with the clients. It could also be merged with any other software company.

RESTRUCTURING PROCESS
y The government decided to appoint 10 nominee-directors.
The new board will take a decision on a new management team.

Deepak Parekh Former HDFC Chairmam

Kiran karnik Former NASSCOM Chairmam

C Achutan Former SEBI Member

y The 3 members of BCG has been appointed as a

management advisor and is working to revive satyam.

y Satyam board has appointed GOLDMAN SACHS &

AVENDUS as its Investment Bankers.

y Companies and government are closely watching Satyam

strategies. They feel that satyam should stand of its own first, if not then only other companys would approach for a takeover/acquisition of satyam.

y Other IT comany like HCL is also considering a possibility

of the takeover and keeping a watch on satyam moves.

y At last the TECH MAHINDRA has taken over Satyam

and in June,2009 and its new name is SATYAM . MAHINDRA

Challenges ahead
y Client Acquisition and Retention. y Retaining employees. y Productivity. y Resource and Skill Gaps. y Funding.
What (policies)

Who (decision)

How (processes)

Tech Mahindra wins bid for Satyam Scam

y Tech Mahindra is paying Rs1757 crore for a 31% stake in the
company, or Rs 58 per share.

y Satyam Computer Services has now zoomed 15% to Rs

54.20 ahead of the announcement of the highest bidder for the company on April 13, 2009.

y In India this moment was full of praise for the manner and
speed with which the reconstituted board of Satyam Computer Services found a strategic investor .

Govt plans Rs 2000-crore package for Satyam

y The Indian Government has decided to take direct action to looking
at a salary bailout for the 53,000 Satyam Computer Services employees.

y A Rs 2,000 crore package is under consideration to ensure that

Satyam employees get their salary on time after it the new board said that they are looking for funds.

y The government is looking at giving three instalments of Rs 500 crore

to Satyam for the next three months and is planning another infusion of about Rs 400 crore.

IMPACT ON INDIA INC.

y Questions have been raised on the balance sheets of other IT
Companies and the role of auditors.

y Investors loosing faith in major IT firms and other major

Corporate due to fraud arisen out of Mr. Rajus confession.

y Due to the satyam turbulence, 70 independent directors of

various companies including ZeeNews, TVS Motors, BHEL etc, had quit from satyam and resigned from there respective companies.

y SEBI has made mandatory for the promoters of the companies to

disclose details of the shares pledged by them.

In the News..

CONCLUSION
y We also wish that the company stands once again whooping
investors not with the false promises but in accordance with its name that is TRUTHFULNESS.

y Quickly put the issues behind us and ensure continuity of our

operations and our services delivered to our customers.

y Do everything that we can as an organisation to ensure the

stakeholders.

y Restore confidence of the customers employees, suppliers and

investors by ensuring business continuity.

Raju Raju sat up on the wall... Raju Raju had a great fall... Balance sheet died... Shareholders cried... Raju Raju made a fraud.

Thankyou