index Introduction to satyam computers, maytasinfra & maytas properties Satyam-maytas fiasco Why raju was failed Confession of raju How did he cook the balance sheet Who is to be blame!! What was possible solution ..? Current status of company

IntroductionSatyam Computer Services Ltd. is a

consulting and information technology services company based in Hyderabad, India . It was found in 1987 by B.Ramalinga Raju. The company offers information technology (IT) services spanning various sectors, and is listed on the New York Stock Exchange and Euronext It is considered as an icon among the IT companies and at one point had over a billion dollar revenue

Satyam's network covers 67 countries across

six continents. The company employs 40,000 IT professionals across development centers in India, the United States, the United Kingdom, the UAE, Canada, Hungary, Singapore, Malaysia, China, Japan, Egypt and Australia. It serves over 654 global companies, 185 of which are Fortune 500 corporations.

Satyam has strategic technology and

marketing alliances with over 50 companies. Apart from Hyderabad, it has development centers in India at Bangalore, Chennai, Pune, Mumbai, Nagpur, Delhi, Kolkata, Bhubaneswar, and Visakhapatnam.

Satyam Maytas FiascoSatyam Computers had on December 16,

2008, announced that it will acquire two group firms - Maytas properties and Maytas Infra The BOD of Satyam had approved the founders proposal to buy 51 per cent stake in Maytas Infrastructure and 100 % in Maytas Properties.

The total outflow for both the acquisitions was

expected to be US$ 1.6 bn comprising of US$ 1.3 bn for the 100% stake in Maytas Properties and US$ 0.3 bn for the 51% stake in Maytas Infra. This is the move that sparked a row over alleged violation of corporate governance laws. This deal is not profitable for investors .So after this announcement they started to raise their voices against the deal

Maytas InfraThe company is run by the sons of Ramalinga

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

Maytas Properties LtdOne of the reasons for the debacle of Maytas

properties is the ongoing economic slowdown The company has huge land banks and the prices have dropped down in the real estate significantly

Satyams justification for Maytas buyout deal

de-risk the core business the integrated organization would be stronger

and more diversified to deal with the uncertainty of the market. feeling that in the recent times it is difficult to make a strategic deal with other IT companies.

Reaction of Investors after the announcement of accusation of MaytasInvestment giant Templeton and brokerage

house CLSA opposed to this decision.

Result of Investors Reactionpart of investors succeeded to It results thatthwart an attempt by the minority-shareholding promoters to use the firms cash reserves to buy out two companies owned by them Maytas Properties and Maytas Infra. That aborted attempt at expansion precipitated a collapse in the price of the companys stock and a shocking confession of financial manipulation and fraud from its chairman, B. Ramalinga Raju

WHY HE FAILED???? The promoters decided to inflate the revenue and profit figures of Satyam. In the event, the company had a huge hole in its balance So to fill up this gap..

Company announced Acquisition of 51%

stake in Maytas Infra and 100% stake in Maytas Properties on 16th Dec 2008 but were unsuccessful.

The deal was not profitable for investors Investors dumped Satyams stock and threatened action against the management. Satyam Computer ADRs took a huge

This was mainly done to hide the

irregularities Satyam

in

the

accounts

of

It is also said the close association with

the political leaders is one of the reasons.

.

Confession

He tried to fill the gap b/w actual profits of the company and the profits that were shown in records, balance sheets etc. and also tried to cope up the situation till last minute . But now the situation were beyond his hands and thereforehe confessed the frauds(on Jan 7, 2009)made by him by showing inflated profits in the balance sheet

According to theconfessional statement of Mr. Raju, the balance sheet shortfall was more than The following statement he made in his confession letter Every attempt to eliminate the (balance sheet) gap failed.

FINANCIAL SHENANIGANS

WHAT WENT WRONG?

Simple manipulation of revenues and earnings To show superior performance Raising fictitious bills for services that were never rendered. To increase the Cash & bank balance correspondingly. Operating profits were artificially boosted from the actual Rs 61 crore to

AND HOW.?????Its financial statements for years were totally false, cooked up and...Never had Rs 5064 crores (US$ 1.05

Billion) shown as cash for several years. Its liability was understated by $ 1.23 Billions The Debtors were overstated by 400 millions plus. The interest accrued and receivable by

CURRENT ASSESTS

2651.6 5312.62

ACTUAL CASH IN BANK WAS 321 INFLATED 5040cr

376ACTUAL DEBT WAS 2161 OVERSTATED 490 Cr

LIABILITIES

NO ACCRUED INTEREST 376 Cr UNDERSTATED LIABILITY 1230 Cr which was arranged by Mr.Raju 5040+376+1230+ 490= 7136

ARTIFICIALLY ADDED 588 OPERATING PROFIT ADDED 588 INCREASING THE CASH RESERVE ONLY FOR Q2 ALONE TO 588

ACTUAL OPERATING MARGIN 61 Cr REPORTED-649 Cr( CREATED AN ARTIFICIAL REVENUE OF 588)

GROWTH IN THE OPERATING PROFIT

INFLATING THE PROFIT AND REVENUE

Satyam scam: So who is to blame?Who is guilty in this

sordid state of events? Raju is by far the father of this fraud. But there were others who are also culpable.

Satyam's auditors auditing So what were thecompany,Pricewater houseCoopers, doing? PwC has written a letter to the BOD of Satyam that its audit may be rendered "inaccurate and unreliable" due to the disclosures made by Satyam's (ex) Chairman.

Is it real? How could Auditors miss the gapingAuditors do bank reconciliation to check

whether the money has indeed come or not. They check bank statements and certificates. So was this a total lapse in supervision or were the bank statements forged? No one knows yet. The company officials said they relied on data from the reputed auditors.

The promoters promoters, in Since thethis case, held only about 8 percent shares, their idea to push through the Maytas acquisition deal was defeated by an angry lot of shareholders.

Other company bigwigs

Satyam's CFO Srinivas Vadlamani has already been arrested. But could only two or three people have managed to cook the books for years of a company so large? Highly unlikely.

The SebiThe Sebi had in

December given a clean chit to Satyam in the probe on violation of corporate governance law.

The bankersIf the auditors were

conned, it means that either the bank statement and certificates were forged Satyam's banks -- ICICI Bank, HDFC Bank, Bank of Baroda, etc

Directors and independent directorsDespite the

shareholders not being taken into confidence, the directors went ahead with the management's decision.

The government The government too isequally guilty in not having managed to save the shareholders, the employees and some clients of the company from losing heavily.

What Management couldthe name of the company. do?? ChangeReconstitution 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.

Tech Mahindra wins bid for Satyam Scam

Tech Mahindra is paying Rs1757 crore

for a 31% stake in the company, or Rs 58 per share. Satyam Computer Services has now zoomed 15% to Rs 54.20 ahead of the announcement of the highest bidder for the company on April 13, 2009. In India this moment was full of praise for the manner and speed with which the reconstituted board of Satyam Computer Services found a strategic investor .

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