Satyam Computer Services Limited, besides known as Mahindra Satyam now, provides information engineering services and concern procedure outsourcing ( BPO ) services in assorted parts of the universe. The company was founded in 1987 and is headquartered in Hyderabad and counts General Electric, Nestle, Qantas and Fujitsu among its major clients.
Scandal:
Maytas Infra and Maytas Properties were two separate imperiums created by Raju for his boies. As Satyam grew over the old ages, even these imperiums grew over the period of clip. Balls of the fraud money were transferred to these imperiums.
January 7, 2009 was a black missive twenty-four hours in the history of Indian Corporate industry as Satyam fell into a deep crisis. Ramalinga Raju inflicted a immense blow to the Indian image in the planetary concern sphere with a cozenage in par with Enron. He resigned as its Chairman after acknowledging to major fiscal errors. The companies across the universe would be more cautious before prosecuting any Indian company for their concern activities.
The Balance Sheet of September 30, 2008 had inflated ( non-existent )
Cash and bank balances of Rs.5,040 crore ( as against Rs.5,361 crore in the books ) ; accrued involvement of Rs.376 crore, ( non-existent )
Understated liability of Rs.1,230 crore
Overstated debitors ‘ place of Rs.490 crore ( Rs.2,651 in the books ) .
September one-fourth reported gross of Rs.2,700 crore ( Rs.2112 crore existent gross ) and an operating border of Rs. 649 crore ( existent runing border of Rs. 61 crore ) . This has resulted in unreal hard currency and bank balances traveling up by Rs. 588 crore in Q2 entirely.
The spread in the balance sheet had arisen on history of hyperbolic net incomes over old ages. All efforts made to extinguish the spread failed. Maytas acquisition trade was the last effort to make full the fabricated assets with existent assets, which failed due to the resistance of independent managers.
Five Bankss, including HDFC Bank and BNP Paribas, informed that the rapprochement statements of the fixed sedimentations shown by Satyam Computers at scrutinizing were non issued by them.
The retentions of Raju and his household decreased from 15.67 % in 2005-06 to 8.61 % in September 2008 and this twelvemonth to a meager 2.3 % without anybody noticing. It is non possible that Raju did non profit from it. He benefited, and that excessively well.
S Gopala Krishnan and Srinivas Talluri ( PricewaterhouseCoopers ) hearers who are the hearers for Satyam Computers, were good cognizant of the fraud and executed it by subscribing the hyperbolic audit studies.
The Satyam fraud grew worse ; Raju had confessed that he diverted Satyam financess to family-owned Maytas Infra and Maytas Properties since 2004, which had denied having any financess from Satyam.
By the clip the dirt exploded, Raju had diverted Satyam ‘s money to his imperium of fraud – siphoning off, Rs 20 crore every month, that was shown in Satyam ‘s books as the salary measure of about 13,000 employees who did non be. Provident Fund Organisation ( PFO ) had made it official that Satyam has merely 43,622 employees.
Raju ‘s youngest brother Suryanarayana Raju really played a bigger function in the cozenage than Raju ‘s other brother, Rama Raju. The money from these histories flowed to benami companies and existent estate foreparts who, bought up huge pieces of land, chiefly in Ranga Reddy, Nalgonda and Hyderabad. He flew about a hebdomad before Ramalinga Raju confessed to the Satyam fraud. Suryanarayana is besides suspected to hold opened two investing houses in Mauritius where money was transferred through hawala. This was subsequently routed back to the benami companies owned by the household.
The cozenage, revealed a clear form into the uncontrolled enrollment of 327 private companies by Raju, his household members and associates, and the fling of land acquisition in the names of these houses. The belongingss were acquired between 2005-2008 and are spread over Andhra Pradesh, Tamil Nadu, Maharashtra, Karnataka and Uttar Pradesh.
The Ministry of Company Affairs ( MOC ) came into action and asked ROC in Hyderabad to carry on preliminary enquiry. SEBI and province authorities all jumped in the difference. The province authorities ordered CID enquiry and filed an FIR against Raju and others by themselves, as no 1 came to register a formal ailment against this fraud.
After having the inquiry study from ROC, MOC order enquiry by Serious Fraud Investigation Office ( SFIO ) .
Impact of the Fraud:
Post revelation of the cozenage, banker Merrill Lynch terminated its battle with Satyam. The Golden Peacock award was taken off from Satyam, they used this award to foreground the company ‘s strong corporate administration construction to warrant the board ‘s determination to offer for Maytas.
The stocks had fell to its lowest degree in over a decennary, approximately 75 % lower at the National Stock Exchange and pulled down the 30-scrip BSE Sensex 750 points to 9,587 and it besides lost Rs. 10,000 crore in market capitalisation. It lost its weightage in SENSEX. NSE removed Satyam from its benchmark index Nifty and other indices like CNX 100, S & A ; P CNX 500, CNX IT and the CNX Services sector index, Dow Jones Indexes. NYSE halted trading in Satyam Computer.
The brothers Raju and Rama, and Chief Financial Officer Vadlamani Srinivas are in gaol.
Satyam Computer named President Ram Mynampati as the interim CEO. Despite the uncertainness over the liquidness place of Satyam, large clients of the house such as GE, Malaysia Airlines continued their existing contracts with the house.
SEBI, paving manner for return over of Satyam, had decided to revise the unfastened offer norms in order to get at a just monetary value for such companies. Larsen & A ; Toubro, Mahindra and Mahindra group, Hindujas, Spice and i-Gate, among others considered the return over of Satyam. Tech Mahindra is the new proprietor of Satyam by geting 31 % interest, has come back in to the black in 4th one-fourth ended March 31, 2009 by posting Rs. 230 crore net net income.
A new Companies Bill, pending in Parliament, would do ordinance more rigorous for hearers. The new measure seeks to revamp old Torahs to assist India ‘s corporate sector adopt international pattern, and companies more accountable.
The council decided that the name of the auditing house, if implicated in any fraud, will be put up on the ICAI web site for five old ages as an watchful ratting corporates and other institutional organic structures about the house ‘s engagement in such an incident.
Decision:
The fraud had, exposed the failure of the regulative mechanism and high spots cultural hazards built-in in India ‘s concerns. However the probe has non come to stop, as on the day of the month of entry of this study, a fraud amounting Rs. 4739 crore has been reported by CBI. Regulations to avoid cozenage of this nature are being created.
