Slide 1

SATYAMSCAM

It was like riding a tiger, not knowing how to get off without being eaten.

"SINKING SHIP OR TIP OF ICEBERG"SCAM

1Company ProfileSet 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.

Set up in the year 1987 by B.Ramalinga Raju.Indias 4th biggest software company.The company was promoted by 2 brothers B Rama Raju and B Ramalinga Raju.On 26th August, 1991 it was converted into a Public Limited Company and went for PUBLIC ISSUE in 1992.BSE IPO oversubscribed 17 times when made public.

2Company ProfileBSE IPO oversubscribed 17 times when made public.It is listed in BSE, NSE, NYSE and Euro next (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.

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.

3Satyam Board StructureOther Independent DirectorsDr M. Srinivasan

Prof. Krishna G PalepuMr. Vinod K DhamProf. M Rammohan RaoMr. T R PrasadProf. V S RajuISB Dean/Bharat electronicsSasken Communication/Hellsoft /Montalvo Systems and NewpathFormer CabinetSecretary /GMR Infra/ GVK TajGTB/Dr. Reddys LaboratoriesB.Ramalinga RajuPromoter & ChairmanB.Rama RajuPromoter & CEORam MynampatiWhole time Executive DirectorSrinivas Vadlamani Chief Financial OfficerSatyam Share holding Pattern

Institutional & Non-Institutional Shareholders

LIC 4.34%L&T4%LazardAberdeen13.16%FidelityICICI PrudentialCitigroupJP Morgan

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

SATYAM Meaning TRUTH.Now, Satyam :-A Rs. 7000 cr LIE.6So, How did it all begin?The promoters decided to inflate the revenue and profit figures of Satyam. In the event, the company had a huge hole in its balance sheet.

So to fill up this gap..

16 Dec 2008Time-Line

Satyam gets board approval for controlling stake in Maytas Infrastructure and Maytas properties as fully owned subsidiary for $1.6B (Rs. 8000 Cr.)9What Is MAYTAS?Maytas InfraThe company is run by the sons of Ramalinga RajuIt was started in the late 1980s by Ramalinga RajuThe 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 was the then ongoing economic slowdownThe company has huge land banks and the prices have dropped down in the real estate significantly

Maytas Link Announcement to acquire 2 group firms owned by Chairman Ramalinga Raju's sons.

51% stake in Maytas Infrastructure and 100 % in Maytas Properties.

US $ 1.3 billion - Maytas Properties and US$ 0.3 billion - Maytas Infra.

Total outflow for both the acquisitions was expected to be US$ 1.6 billion.

Satyam Computers had on December 16, 2008, announced that it will acquire two group firms owned by Chairman Ramalinga Raju's sons - 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 billion comprising of US$ 1.3 billion for the 100% stake in Maytas Properties and US$ 0.3 billion for the 51% stake in Maytas Infra. 11Satyam backs out of Maytas deal citing investors protest17 Dec 2008Time-Line26 Jan 2009

Satyam shares plunge 55 percent in NYSE. BSE share plunges over 30% 12The Actual Scam Raising fictitious bills forservices that were neverrendered.

To increase the Cash &bank balance from Rs 321cr to Rs 5040 cr.

Operating profits wereartificially boosted fromthe actual Rs 61 cr to 588 cr.

The Debtors were overstated by 400 millions plus.

Its financial statements for years were totally false, cooked up.

Never had Rs 5040 cr (US$ 1.05 Billion) shown as cash for several years.

Its liability was understated by $ 1.23 Billions

Fabricated Income Statements

Creative Account Practice Details of cash balances with Scheduled banks are not there in the Annual report

Overstated cash balances, Income receivablesUnderstated LiabilitiesFraud AmountUNDERSTATED LIABILITY 1230 Cr. Which was ARRANGED BY MR.RAJU

08 Jan 09Jan Post ScamRaju brothers arrested by the police on charges of criminal conspiracy, cheating, forgery, misappropriation of funds and criminal breach of trust.

PwC in major trouble. Stocks of PwC clients take a major beating at the BSE and NSEBSE to replace Satyam Computer with Sun Pharmaceutical in its benchmark index Sensex with effect from January 12. 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. 10Jan CFO Valdamani Srinivas, who is the financial custodian of the company resignsMarket Capitalization of satyam falls to Rs. 1,607 Cr from Rs.15,262 Cr. on Dec 16 in 19 trading sessions.Former CFO Valdamani Srinivas remanded to judicial custody

Investors have lost a whopping Rs 13,600 crore ($2.82 billion) in Satyam[Get Quote]shares in less than a month, since the skeletons started tumbling out of the company's cupboards.The market capitalisation of Satyam fell to Rs 1,607.04 crore (Rs 16.07 billion) on Friday from Rs 15,262 crore (Rs 152.62 billion) at the end of trade on December 16, 2008, the day when Satyam announced an $1.6 billion acquisition deal of two firms promoted by the kin of IT firm's former chairman Ramalinga Raju. However, the company aborted the deal hours later after the investors dissent.The meltdown in the scrip wiped off as much as Rs 13,655 crore (Rs 136.55 billion) in just 19 trading sessions.The share price of Satyam plunged to Rs 23on Friday from over Rs 200 levels on December 16, when the fiasco began.

Investors received a rude shock on January 7, when Ramalinga Raju tendered his resignation and confessed to close to Rs 7,800 crore (Rs 78 billion) accounting fraud in the company.

The stock had nosedived close to 80 per cent to Rs 39.95 after the starking revelations on that day.The major erosion in the market cap was suffered in the past two trading sessions which wiped off Rs 10,460 crore (Rs 104.6 billion) with the scrip plunging as much as 86 per cent since January 7.Analysts believe the scrip is likely to stagnate at Rs 20 levels even as the Satyam counter was among the most traded on the bourses."The scrip is stagnating at Rs 20 levels. But we cannot fix the valuation of the company based on the current price movement. The scrip is more of news report driven and struggling to find some ground," SMC global vice president Rajesh Jain said.Interestingly, Satyam shares had gained a combined 23 per cent in six consecutive trading sessions between December 26 and January 1, amid reports that the firm was ripe takeover target for rival IT firms and private equity investors.The stock had also gained after the company announced that the board would consider a buyback of shares in its meeting scheduled for December 29.However, the company had postponed the board meeting to January 10.

1813 Jan 14Jan Post ScamThe newly appointed 3 member board appoints auditing firm KPMG and Delloitte to assist it in cleaning the mess in the scam tainted companys accounts

Government hands satyam case to SFIO15Jan Maytas stocks hit the lower circuit for 7th consecutive trading session16Jan 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 India19Issues InvolvedEthical Issues

Legal Issues

Accounting Issues

Corporate Governance Issues.What made Raju To do Scam ?

Pressure to improve the company's performance.

Capture market.

Achieve billion dollar sales mark.

But once Mr Raju sold shares to the Indian public in 1992 and later, went for a New York listing in 2001, pressure grew on him to improve the company's performance. Ever competitive, he was also in a rush to catch the market leaders, Tata Consultancy Services, Infosys Technologies and Wipro. Raju was obsessed with getting past the billion-dollar sales mark. When he got there, he wanted to post US$2 billion. Satyam posted US$2.1 billion (S$3.1 billion) sales in the year to March 31; 2008.With the ever-rising pressure to perform, Satyam began doctoring the books to show bigger profits by manipulating the balance sheet, a process that began several years back.22Regulators investigating Satyam include

Action Taken By AuthoritiesChartered 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.

Government asked the Serious Frauds Investigation Office (SFIO)

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 and both were shifted to Chanchalguda Central Jail near the city.

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 45,000-50,000 employees. A moment of truth for Satyam and a victory for the government and the regulators.25Court VerdictB Ramalinga Raju to a seven-year jail.The court also fined Raju Rs 5.5 crore and other 9 co-accused Rs 50 lakh each.SEBI Fined Raju brothers-Ramalingam and Rama-and three former senior executives a total of Rs 1849 crore.They were also charged another Rs 1220 crore by way of interest charges at 12 percent.All five were charged with insider trading and barred from the securities market for 14 years.Lessons LearnedIndependent Director.Disclosure of Pledged Securities.Financial Accounting Disclosure.Adopt IRFSNew Code of MCA.Transparency at workGovernment InterventionCode of ConductSteps Taken After Satyam FraudIntroduction 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. Raju RajuYes Baba,Cheating usNo Baba,Telling LiesNo Baba,Open the balance sheetHA! HA! HA!

B. Ramalinga RajuFounder & Chairman, Satyam Computers Ltd.

Thank You !Chart10.08740.61220.10580.1946

Sharholding Pattern as on 31st March 2008Shareholding Pattern as on 31st March 2008

Sheet1Sharholding Pattern as on 31st March 2008Promoters8.74%Institutional Shareholders61.22%Non-Institutional Shareholders10.58%Custodians19.46%To resize chart data range, drag lower right corner of range.

Chart14003300900

SalesTotal Market Capitalisation Loss of 4600 Cr.400 Cr.3300 Cr.900 Cr.

Sheet1SalesPromoters400Non Promoter shareholders3300Equity in Custodian Accounts900To resize chart data range, drag lower right corner of range.