Satyam Scam

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Page 1
INTRODUCTION
Satyam Computers was founded in

1987.
It converted into Public Ltd Co. in
1992.
The company offers consulting and
information technology services
spanning various sectors.
Mahindra Satyam is overall ranked
#153 by Fortune India 500 in 2011.
Satyam's network covers 66 countries
and 53000 employees across six
continents. It is listed in BSE, NSE,
NYSE
Page 2
He is Ramalinga Raju born on September 16, 1954.
A traditional agricultural family of the KSHATRIYA
(RAJU) Community of Andhra Pradesh.
He founded Satyam Computers and was its Chairman

until January 7, 2009 when he resigned from the Satyam
board after admitting to corporate fraud.
Page 3
The Rise of Satyam
1987 : Satyam Computers Pvt. Ltd. Born.
1991 : June - First Fortune 500 Client.

August - Converted into Public Ltd. Co.
1994 : The Big Break- Allies with Dun and Bradstreet

Corp.
2000 : Declared one of the 100 most pioneering
technology companies by World Economic
Forum.
2002
Dataquest IT Man of the year award.
Page 4
History
He was first businessman in the field of construction
and textiles.
Raju founded Satyam in 1987.
He started an satyam computers with 20 employees in
1987.
Satyam was listed in INDIAN STOCK EXCHANGE in
1991.
Listed in NEW YORK STOCK EXCHANGE in 2001.
Satyam was listed in UNESCO(Amsterdam) in 2008.
There were 52000 employees working in Satyam in
September 2008
Page 5
ACHIEVEMENTS
2007:- BECOMES THE 1ST ASIAN COMPANY TO
FEATURES IN THE TRAINING MAGAZINES LIST OF
TOP 125 COMPANIES FOR LEARNING,
2008:-WON CORPORATE GOVERNANCE

(INCLUDING GOLDEN GLOBAL AWARD TWICE)
Top-50 Marketers Award, under the
Resurgent Marketers category for 2010 by
Pitch India
2011:-Mahindra Satyam BPO honored as

Indias Most Customer-Responsive BPO
Company AGC Networks The Economic
Times, Ernst & Young and Nielsen
And the list goes on..
Page 6
People Behind This Scam
Ramalinga Raju : Satyam former chairman

B Rama Raju : Brother of Ramalinga Raju
Former Managing Director
V Srinivas : Ex-Chief financial officer
S Gopalakrishnan: Price Waterhouse Auditor
Talluri Srinivas : Price Waterhouse Auditor
Page 7
The scam
1. Raju and his brother, B Rama Raju, were arrested by the Andhra
Pradesh police on charges of breach of trust, conspiracy,
cheating, falsification of records.
2. Raju has mislead various investors.
3. Raju had also used dummy accounts to trade in Satyam's
shares.
4. He has violated the insider trading norm.
5. Funds from Satyam were diverted to Mayas
6. 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 carore
rupees every month for paying these 13,000 non-existent
employees.
Page 8
Raju wanted to take over his MAYTAS INFRA and
MAYTAS PROPERTIES.(company of his sons).
He was blamed that he was using the funds of the
investors for the family business.
There were allegations that funds from Satyam were

diverted to Maytas, causing the Government agencies to
verify the infrastructure companys records as well. .
Page 9
HOW DID IT HAPPENED?
FLOATED TWO OTHER COMPANIES FOR THEIR

OWN PURPOSE .
WITHOUT TAKING PERMISSION OF THE
SHAREHOLDERS.
FAILED TO REPAY THE LOANS.
TRANSFER OF MONEY.
Page 10
UNDERSTANDING THE SCAM!
THE BALANCE SHEET AS OF SEPTEMBER 30, 2008 SHOWED-

INFLATED (NON-EXISTENT) CASH AND BANK BALANCES OF RS.
5040 CRORE (AS AGAINST RS. 5312 CORE REFLECTED IN THE
BOOKS)
AN ACCRUED INTEREST OF RS. 376 CRORE WHICH IS NON-
EXISTENT
AN UNDERSTATED LIABILITY OF RS.1230 CRORE ON ACCOUNT
OF FUNDS ARRANGED BY BR RAJU.
Page 11
SATYAM SHARES
Biggest single day fall for a stock in stock
market.
77
Rs. 175 ( Jan 6 )
th
%
STOCK MARKET
BSE sensex fell by 749.05 i.e., 7.25%.
NSE fell by 192.40 points i.e., 6.18%.
COMPANIES WORTH
11464 crore 1607 crore.
All time low of Rs.11.50 on 9th Jan and
closed at Rs.23.75/-
Compared to highest of Rs. 524.90/-
on May 29,2008. Page 12
Page 13
Company Logo Page 14
PwC - Partners in Crime ???
Previous record -
Satyam has also been accused of frauds in 2001
and 2003.
No importance was given to this.
Getting third party evidence -
No bank confirmation on fixed deposits
Accrued interest(fixed deposit)
Debtors confirmation
Factors overlooked -
Changing of accounting years
Huge debt despite cash surplus
Page 15
CONFESSION
JANUARY 7TH, 2009

IT WAS LIKE RIDING A
TIGER , NOT KNOWING
HOW TO GET OFF
WITHOUT BEING EATEN
Page 16
Why Did Raju Confess?
WHY DID RAJU CONFESS
The gap in the balance sheet reached
unmanageable proportions and could
not be filled anyhow in future.
The whistle blower whose email to a

Satyam board member triggered a
chain of events .
Page 18
PROBABLE REASONS
PRESSURE TO MEET Growing Competition
EXPECTATION Threat of being overtaken
OVERCONFIDENCE On his ability
Siphoning of funds
PERSONAL BENEFITS Salary of non-existent 13000
employees
Since about seven years we wanted to show more income

in the accounts to avoid others from involving in the company
affairs and any possible hostile acquisition.
Page 19
Action Taken:
New board of directors were appointed.
Disclosure of pledged securities.
Increased financial accounting disclosure.
Adoption of international standards.
Creation of new corporate code of conduct

by Ministry of Corporate Affairs.
Steps taken by ICAI.
Page 20
Regulators Investigating Satyam
Investigating Satyam
Page 21
Consequences
BEFORE THE SCANDAL ITS SHARE PRICE WAS RS 300 IN OCT.2008.

JUST AFTER THIS SCANDAL THE SHARE PRICE GO DOWN TO RS 6.30.
ON 10 JANUARY 2009, THE COMPANY LAW BOARD DECIDED TO BAR THE

CURRENT BOARD OF SATYAM FROM FUNCTIONING.
BANK OF AMERICA AND STATE FARM INSURANCE TERMINATED ITS

ENGAGEMENT WITH THE COMPANY.
CREDIT SUISSE SUSPENDED ITS COVERAGE OF SATYAM. THE CREDIT

SUISSE GROUP AG (SIX: CSGN, NYSE: CS) IS A SWISS MULTINATIONAL
FINANCIAL SERVICES COMPANY HEADQUARTERED IN ZURICH,
SWITZERLAND.
Page 22
Jobs of over 50,000 technocrats were at risk.
Country`s booming economy was at risk.
The GDP fell by 0.4%.
I.T sector suffered a downturn.

India`s global image was tarnished.
Indian stock market fell dramatically.
Page 23
IMPACT OF SCAM
Stock Market Share-holders Indian economy
Stake-holders
Employees
Ramalingam Raju along with 2 other accused of the
scandal, had been granted bail from Supreme court
on 4 November 2011 as the investigation agency CBI
failed to file the charge sheet even after more than
33 months of Raju been arrested Appointing New
Board. Board appointed by Government.Tech
Mahindra wins bid for Satyam scam.
Page 25
SATYAM UNDER
RECONSTRUCTION
Appointing new board.
Board appointed by government :
former Nasscom chief Kiran Karnik,
Chairman HDFC Deepak Parikh
Former SEBI member C. Achuthan .
Satyam shares gained over 44% day
after appointment of the new board.
New CEO A S Murthy
Tech Mahindra acquired Satyam on April
13,2009.
Page 26
ON 13TH APR 2009, VIA FORMAL PUBLIC
AUCTION PROCESS, 46% STAKE IN SATYAM WAS
PURCHASE BY MAHINDRA.
JULY 2009, SATYAM REBRANDED ITS SERVICE

AS MAHINDRA SATYAM.
Page 27
Conclusion
More scandals like Satyam can be

avoided if-
1.If auditing firm is honest.

2.SEBI plays an active role.
3. Periodic review of legal compliance
reports by independent directors.
Page 28
T
H
A
N Presented By
K Prakhar Jain
Ronan Vadher
Pooja Prajapati
Diptesh Deherkar
Ankita Chougule
Y Ankur Barot
Abhijeet Purohit
O Shailesh Mali
Garvit Mathur
U
Company Logo
Page 29
CONTENTS
The rise of Satyam
Revelation by Raju
How did the fraud start?
Probable reasons
Maytas acquisition
Why did Raju confess?
Impact on the Nation
investigation
Page 30

Satyam Scam

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Satyam Scam

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Powerpoint Templates

Satyam Computers was founded in

He founded Satyam Computers and was its Chairman

1991 : June - First Fortune 500 Client.

1994 : The Big Break- Allies with Dun and Bradstreet

2008:-WON CORPORATE GOVERNANCE

2011:-Mahindra Satyam BPO honored as

Ramalinga Raju : Satyam former chairman

There were allegations that funds from Satyam were

FLOATED TWO OTHER COMPANIES FOR THEIR

THE BALANCE SHEET AS OF SEPTEMBER 30, 2008 SHOWED-

JANUARY 7TH, 2009

The whistle blower whose email to a

OVERCONFIDENCE On his ability

Since about seven years we wanted to show more income

New board of directors were appointed.

Disclosure of pledged securities.

Increased financial accounting disclosure.

Adoption of international standards.

Creation of new corporate code of conduct

BEFORE THE SCANDAL ITS SHARE PRICE WAS RS 300 IN OCT.2008.

ON 10 JANUARY 2009, THE COMPANY LAW BOARD DECIDED TO BAR THE

BANK OF AMERICA AND STATE FARM INSURANCE TERMINATED ITS

CREDIT SUISSE SUSPENDED ITS COVERAGE OF SATYAM. THE CREDIT

I.T sector suffered a downturn.

Stock Market Share-holders Indian economy

JULY 2009, SATYAM REBRANDED ITS SERVICE

More scandals like Satyam can be

1.If auditing firm is honest.

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