final presentation satyam scam

8/7/2019 Final Presentation Satyam Scam

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Satyam Analysis...


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Presented bySudhir Khare 28

Gulnaz Mahadik 31

Ritika Khare 32

Nitin Arvindakshan 36

Prashant Salvi 41

Nisha Singh 51

Geetanjali Ashok 20


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Satyam Computer Services Ltd was founded in 1987 byB.Ramalinga Raju.

The company offers information technology (IT) servicesspanning various sectors, and is listed on NSE, BSE, theNew York Stock Exchange and Euronext.

Few milestones:

1987Incorporated as private limited company in 1987

1991

Recognized as a public limited company; debuts onthe Bombay Stock Exchange (BSE)

IPO oversubscribed by 17 times

1993

Satyam signs joint venture with Dun & Bradstreet for ITServices

Joint venture with GE announced


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1999

Satyam Infoway (Sify) becomes the first IndianInternet company listed on NASDAQ

Satyam forms joint venture with TRW Inc.

Presence established in 30 countries

2007Becomes the Official IT Services Provider for the FIFAWorld Cups, 2010 (South Africa) and 2014 (Brazil)

Announces acquisition of UK-based Nitor GlobalSolutions Limited

Becomes the first Asian company to feature in theTraining Magazines list of Top 125 companies forlearning


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Satyam Scandal.

Cooking books of accounts


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Ramalinga Raju, chairman

None of the board members, past or present, had anyknowledge of the situation in which the company isplaced.

I INFLATED (non existent) cash and bank balance of Rs5,040 crore(as against Rs 5,361 crore) reflected in thebooks.

AN accrued interest of Rs 376 crore is non-existent.

I HAVE understated liability to the tune of Rs1,230 crorein accounts of funds arranged by me.

I HAVE over-stated debtors position of Rs 490 crore (asagainst Rs 2,651 crore reflected in the books.)

FORsept 2008, we reported Rs2,700 crore revenue andoperating margin of Rs 649 crore against actualrevenue of Rs2,112 crore and margin of Rs 61 crore.


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Vadalamani Srinivas,CFO

I was asked specifically to not look into bank statement

AUDITORnever pointed out any deficiencies duringtheir discussions. Fixed deposits were unreal andfictitious which were managed with an understandingbetween the audit section and management.

BANK deposit were handled directly by Raju and the CFOwas specially asked for not to look into it

RAJU and his brother used to take decisions and tell usto do as instructed.

THE CFO admitted that the account were manipulated forabout seven years.

PRIORto quarterly board meetings, Ramakrishna,VP,finance,would prepare the balance sheet. I donot pay much attention to the details of that balancesheet.


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Scenario I Forgery incThe scam team forged invoices to show collection

of revenue abroad, forged bank statement to show

inflow of money, showed transfer of money to fixed

deposits (FDs) through forged FD receipts and

reflected all this in the final accounts. The assetsand liabilities are altered Q2Q to reflect rising

income and rig share price.

CAVEAT This would require matching ofrevenue With staff strength and salary cost. Would

also require forging ofTDScertificates for incomefrom FDs.

POSSIBILITY High, as there is logic and objective.


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Scenario II True Lies

Satyam did make money on export. Raju raised

invoices for export abroad; money did come through

the banking channels and was transferred to long

term FDs and reflected in the books. Once the FDs

were recorded in the books the deposits were

dissolved and money transferred to multiple

accounts. The books continued to reflect the FDs as

you dont need to surrendercertificate anymore.

Siphoned money was use to acquire land, property,

pay for political patronage for Maytas Infra and

Maytas properties.

CAVEAT This again require forging ofTDScertificates for accrued interest and connivance of

auditors.

POSSIBILITY Very high


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Scenario III Hawala Inc

Raju receives political slush money abroad,

brings it as invoiced billings, shows it in his book

and transfers it to FDs to be dissolved latter.The

money transferred to multiple accounts is

siphoned to repatriate politicians money and forfunding the activities of Maytas.

CAVEAT Have to show staff strength tomatch revenues or ramp up operating margins.

Besides

co-opting auditors and forging

TDS

certificates.

POSSIBILITY Very very high, is in sync withwhispers of pressure to pay politicians and

patronage.


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Balance sheet of Satyam computer ltd.

SOURCES OFSOURCES OF FUNDSFUNDS AS ONAS ON30.09.0830.09.08

ADJUSTEDADJUSTEDBALANCE SHEETBALANCE SHEET

ADJUSTMENTADJUSTMENTSS

1.1. Shareholders fundsShareholders fundsa. Share capitala. Share capital(share application(share applicationmoney , pending)money , pending)

b. Allotmentb. Allotment

c. Reserves andc. Reserves andsurplussurplus

134.70134.70

2.762.76

8392.238392.23

134.70134.70

2.762.76

((--)415.47)415.47

2. Loan Funds

a. secured loans

b. unsecured loans

____________________

30.49

234.80

______

8794.98

_______

30.49

1464.80

_______

1217.28

_______

1230.00

_______

1230.00

________


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The Balance Sheet carries as ofSeptember, 30, 2008:

Inflated Cash and Bank balance of Rs. 5,040 Crores Accrued interest of Rs. 376 Crores which is non-existent Understated liability of Rs. 1,230 Crores Over stated debtors position ofRs. 490 crores

For the September Q2, reported a revenue of Rs. 2700 Crores and anoperating margin of Rs. 649 Crores as against the actual revenues of Rs.2,112 Crores and an actual operating margin of Rs.61 Crores ( 3%of revenues). This has resulted in artificial cash & bank balances goingup by Rs. 588 Crores in Q2 alone.

Immediate Market Reaction: Sensex stock index dropped 7.3% Satyam shares fell nearly 78%

Rajus Confession on 7th Jan09


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13

Satyam Vs Enron Vs

Malpractices amounting worth USD 1.3 billion Masterminded by its founder-owner R Raju (CEO) and his brother SENSEX tanked 7.2 % when Raju announced of the fraud Government appointed new auditors KPMG and Deloitte Government guaranteed safety of jobs for all 53,000 employees

Accounting books were manipulated in conspiracy with its auditor ArthurAndersen NYSE tanked 0.9% when Enron filed for bankruptcy Government created Sarbanes Oxley Act US S.E.C. revoked CPA license of Arthur Andersen

Satyam

Enron

Scott Sullivan (CFO), David Myers and Buford Buddy Yates (Director ofGeneral Accounting) used fraudulent accounting methods to mask itsdeclining earnings Arthur Andersen withdrew its audit opinion for 2001 Government created Sarbanes Oxley Act

Worldco

m


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APPLICATION OF FUNDS AS ON

30.09.08

ADJUSTED BALANCE

SHEET

ADJUSTMENT

S

1. Fixed assests

2. Investments

3. Tax

4. Current assests

a. sundry debtorsb. cash

c. accrued interest

d. Loans

LIABITIES

Net current assests

TOTAL APPLICATION OF FUNDS

1381.10

618.64

118.75

2651.365312.62

376.34

502.22

2166.05

6676.49

_______

8794.98

1381.10

618.64

118.75

490.00272.62

-

502.22

2166.05

901.21

_________

1217.28

1381.10

618.64

118.75

2161.365040

376.34

-

-

5775.21

(differenc

e)

________

7577.7


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Where is the money???


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1) If the company claims it has cash in its bank,auditors should checked whether the cash in bankwas available or not. Actual 321 Cr. Inflated5040 Cr.

2) Was the bank balance invested properly and-whereall was it invested MFs, Bonds, Securities etc.

3) Whether the internal control mechanisms are inplace internal audits, statuary compliance, riskmanagement.

4) Why did company have huge creditors and balanceat the same time.

?

Questions to the auditors


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cont5) Look into why the company is not taking benefits

and negotiating the price.

6) Are the profit margin abnormal compare to industry

norms?

7) Check if there has been a quantum jump in wealth.

8) Carry out ratio analysis of the figures in the

organization, previous year & industry standards.

9) Undertake Physical verification of assets owned bythe company.

?


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Deepak S. ParekhExecutive Chairman HDFC group

Kiran Karnikpresident of Nasscom

C. Achuthanformer presiding officer of the Securities AppellateTribunal

Tarun DasFormer president CII

T.N. Manoharan

S.B. Mainak

New board of director formation bycompany low board and Ministry ofcompany affaires


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Spice group

Tech Mahindra

Hinduja group

L&T

GE

Bidders for Acquisition


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Finally Satyam acquired by tech

mah

indra.


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final presentation satyam scam

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