Satyam Computers Case Study 2022.pptx

We have made our assignment on Satyam Computers

1. The Story of India’s Biggest Corporate Fraud!

2. INTRODUCTION Satyam Computer Services Limited, Once a largest IT firm situated in Hyderabad,India was started by Mr. Ramalingam Raju & DV Satya Narayana Raju on 24 June 1987. The firm began with 20 employees offering IT and BPO services across various sectors. It quickly expanded to become a worldwide company with operations in 65 countries across the world. The company was so successful that it got listed on Bombay stock exchange in 1992 and later on three global stock exchanges, namely New York Stock Exchange (NYSE), DOW Jones, and EURONEXT, it was the first Indian internet business to be listed on the NASDAQ (American Stock Exchange). After TCS, Infosys, and Wipro, it was recognized as India’s fourth-largest IT firm in India. In the fiscal year 2003-2004, Satyam’s total revenues were Rs . 25,415.4 million. By March 2008, the company’s sales revenue had increased by more than thrice. In 2007 and 2009, Satyam received the Golden Peacock Award for the best-governed corporation in September 2008. Satyam Computer was giving its IT service to more than 650+ companies in which 185 were fortune 500 companies.

3. Satyam Computers was once the crown jewel of the Indian Information Technology sector (IT sector), but it was brought to its knees in 2009 by its founders due to financial fraud.

4. SCAM The success run of the company was hatted rather abruptly on December 16,2008, they announced that it will acquire two group firms 1. Maytas properties 2.Maytas Infra The Board Of Directors of Satyam had approved the founder's proposal to invest the company's funds in buying stakes for an amount equivalent to USD 1.6 billion against their book worth of only USD 225 million in both firms. The two firms, Maytas Properties and Maytas Infra Limited was founded by chairman Ramalinga Raju's sons. He was blamed that he was using the funds of investors for the family business. There were allegations that funds form satyam were diverted to maytas , causing the government agencies to verify the companies records. The company’s balance sheet was inflated to Rs 5,361 crore at the end of September 2008 against the actual Rs 5,040 crore . Raju also admitted that Satyam's profits were inflated over several years. And it is difficult for him to stop this fraud gap. He added, "It was like riding a tiger, not knowing how to get off without being eaten." The Maytas deal was the last attempt to fill the fictitious assets with real ones. Raju also said Rs 1,230 crore was arranged to Satyam, which is not reflected in its books , to keep Satyam's operations running. For this the promoter had to pledge the promoter shares and raising funds from other sources.

5. HOW WAS THE SCAM DONE ? So Basically There Were 3 Main Reasons For Scam. The books of accounts were manipulated (Profits were inflated ). Money laundering was done. (Using of dummy accounts to trade in Satyam's shares violating the insider trading norm) Purchasing of real estates . (Funds from Satyam were diverted to Mayas)

6. OBSERVATION Liabilities were understated by $1.23 billion. Debtors were overstated by 490 millions plus. Operating profits were boosted from Rs.61 crore to Rs. 649 crore. This was mainly done to hide the irregularities in the accounts . It was also said that close association with political leaders is one of the reasons. Raising fictitious bills for services that were never rendered . To increase cash and bank balances correspondingly.

7. Fabricated balance sheet and income statement of Satyam: as of September 30, 2008.

8. Impact on Country. More than 50,000 people jobs were at risk. Country’s booming economy feared slight collapse as country's GDP fell by estimated 0.4%. India’s it sector suffered downturn as it’s image was tarnished globally. On 22 January 2009, CID told in court that the actual number of employees is only 40,000 and not 53,000 as reported earlier and that Mr. Raju had been allegedly withdrawing INR 20 crore rupees every month for paying these 13,000 non-existent employees.

9. After the scam. New board was appointed by the Indian Government. Chairman HDFC Deepak Parikh, Former SEBI member C. Achuthan . Former Nasscom Chief Kiran Karnik Satyam shares gained over 40% day after appointment of new board. AS Murthy was appointed as the New CEO. The board’s goal was to sell the company within the next 100 days. Several companies bid on April 13, 2009. The winning bid was placed by Tech Mahindra who went on to buy Satyam for 1/3rd of its value before the fraud was revealed. Tech Mahindra was ranked #5 in India's IT firms and overall #47 on Fortune India 500 list for 2019.

10. Govt . Iniatives The Government of India and regulator SEBI has learned lesson from that financial scam by Mr. Ramlinga Raju and others. The Government of India had given the power to SEBI to arrest in these types of cases. Ministry of Company affairs made a body of retired judges of Supreme Court and High court named Serious Fraud Investigation Organization (SFIO). Institute of Chartered Accountants also barred PWC to do audit in India. ICAI will also act as a watchdog on these Auditing firms. Besides this SEBI has done lot of hard work in the proper

11. Future Tech Mahindra continues to expect deal wins of US$ 700 million to US$ 1 billion per quarter. Additionally, Tech Mahindra has enough visibility for the next 12-18 months. While they are not seeing any rampant change in client spending, some start-ups have seen some minor cuts in spending.

12. Conclusion More scandals like Satyam can be avoided if the auditing firm is honest. SEBI plays an active role. Periodic review of legal compliance reports by independent directors.

13. THANK YOU Submitted to – Dr. Tina Murarka Project by – Group 6 ( Sweta Ranjan,Shagun Chaparia,Harsh Kumar,Anupam,Ankit Kumar)