Satyam Shares | Satyan Stock Price | Fraud | Chairman Ramalinga Raju Resigns | Satyam News | Satyam Computers | Auditors

Satyam Shares | Satyan Stock Price | Fraud | Chairman Ramalinga Raju Resigns | Satyam News | Satyam Computers | Auditors | Satyam Crisis

Under attack over $1.6 billion acquisition fiasco of firms promoted by his family Satyam [Get Quote] Computer Chairman B Ramalinga Raju on Wednesday resigned and said he would subject himself to the "laws of land".

Minutes later, the company also announced resignation of its managing director B Rama Raju.

In a letter to the board, Raju has given balance sheet details. In a shocking revelation, he has said that the balance sheet details over the years was fictitious.

The balance sheet has inflated cash balances of Rs 5,040 crore (Rs 50.40 billion) and accrued interest of Rs 376 crore (Rs 3.76 billion) is non-existent. Rs 1,230 crore (Rs 12.30 billion) was arranged to Satyam and is not reflected in the books.

He admitted that second quarter numbers were inflated to Rs 2,700 crore (Rs 27 billion) when the actual figure was Rs 2112 crore (Rs 21.12 billion). He also said that other board member were unaware of the real numbers.

He admitted that the accounts manipulation started a few years ago. The attempts to stop manipulation failed, he said in his confession.

The Satyam balance sheet, as on September 30, 2008, had an accrued interest of Rs 376 crore (Rs 3.76 billion) which is non-existent. It also had an understated liability of Rs 1,230 crore (Rs 12.30 billion) on account of funds arranged by Ramalinga Raju. The balance sheet showed an overstated debtors position of Rs 490 crore -- Rs 4.90 billion -- (as against Rs 2,651 crore -- Rs 26.51 billion -- reflected in books).

The gap in balance sheet has arisen purely on account of inflated profits over a period of last several years.

The resignations, ahead of January 10 board meeting pushed the company into crisis and paved the way for immediate restructuring of the board and the management.

Satyam, considered a ripe proposition for acquisition, was pushed into crisis after Raju was forced to abandon the acquisition of Maytas Infrastructure and Maytas Properties promoted by his son...more

Satyam Share Prices and Stock Options Can Be Checked Here

The Great Satyam Fraud

Terming disclosures of financial wrong-doings at Satyam [Get Quote] as an event of 'horrifying magnitude,' the Securities and Exchange Board of India on Wednesday said it would take all steps under the law for which it has started discussions with government and bourses.

"We are in touch with Ministry of Corporate Affairs. We are also in discussion with them as to what steps need to be taken from the perspective of power they have under the law and Sebi has under the law," Sebi chairman C B Bhave said.

Sebi was also forwarding the letter written by Satyam's chairman B Ramalinga Raju on his stepping down with the confession that the profits in the company were inflated over the years, leading to wide gap between real and imaginary assets.

Govt to refer Satyam case to Serious Fraud Investigation Office

The government has decided to refer the Satyam case to Serious Fraud Investigation Office, an official of the Ministry of Corporate Affairs said.

All regulators and government agencies will make coordinated efforts to get to the bottom of the Satyam wrongdoings, the official said, adding that the 'company management not been fair to the shareholders'.

Satyam plunges to all-time low

Meanwhile, the Satyam Computer stock nosedived nearly 70 per cent to an all-time low of Rs 58, following the resignation of the company's chairman B Ramalinga Raju and Managing Director B Rama Raju.

Shares of Satyam plunged as much as 67.71 per cent to a low of Rs 58, but was later trading at Rs 73.50, down 58.96 per cent in the afternoon trade on the Bombay Stock Exchange.

The scrip, which had opened at Rs 179.10, plunged within minutes of Satyam chairman and managing director tendering their resignation...more

The latest imbroglio involving one of India's largest IT companies, Satyam Computer Services [Get Quote], has virtually discredited the concept of corporate governance.

Satyam, as it is widely reported sought to invest into another company involving a conflict of interest for its promoters. This in turn involved a change in the fundamental character of the company and utilization of virtually its entire cash balance.

Satyam was also being accused by the World Bank for bribing its employees to get certain contracts awarded in the company's favour.

While these are allegations at this point in time, it may be noted, that the company had approached suitable independent professionals to get the necessary clearances under the extant law of the land as well as appoint independent directors. Ostensibly, the idea is to 'comply' with the code of corporate governance on paper.

What is interesting to note here is that as negative reports about the company come out into the open, let us not forget that it won the prestigious Golden Peacock Global Award for excellence in Corporate Governance.

The company was named the winner by the World Council for Corporate Governance as recently as in September 2008!

That, in effect, is corporate governance in practice for you!

Times of India Says

Sensex tumbles over 750 pts as Satyam chief resigns

MUMBAI: Indian equities markets were reeling under tremendous selling pressure Wednesday after a shocking scam by the promoters of Satyam
Computers came to light.

Ramalinga Raju, chairman of Satyam Computers resigned from his post and confessed to indulging in fraudulent activities like inflating the books for several years.

Raju has written a letter to the board giving details of the balance sheet. Balance Sheet has inflated cash balances of Rs 5040 crore and accrued interest of Rs 376 crore is non-existent. Rs 1230 crore was arranged to Satyam and is not reflected in the books. As per the revelations, second Quarter numbers were inflated to Rs 2700 crore vs Rs 2112 crore actual numbers. No board member had any knowledge of the real situation of the books.

Bombay Stock Exchange’s Sensex breached support of 10,000 mark. At 1:45 pm, Sensex was at 9564, down about 772 points.

National Stock Exchange’s Nifty was at 2908, down about 200 points.

Satyam Computers (-61.42%), Jaiprakash Associates (-13.24%), Reliance Communications (-10.91%), DLF (-10.29%) and Reliance Infrastructure (-8.11%) were the major Sensex losers.

Tata Steel (1.32%), Infosys Technologies (0.21%) and Maruti Suzuki (0.20%) were the only gainers.

Market breadth was negative on the BSE with 1670 losers and 541 advances...more

Here is Satyam Chairman Resignation Letter

To the Board of Directors, Satyam Computers Services Ltd.

From B. Ramalinga Raju, Chairman, Satyam Computer Services Ltd

Dear Board Members,

It is with deep regret, and tremendous burden that I am carrying on my conscience, that I would like to bring the following facts to your notice:

1. The balance sheet carries as of September 30, 2008

a) Inflated (non-existent) cash and bank balance of Rs 5,040 crore (as against Rs 5361 crore refglected in the books)

b) An accured interest of Rs 376 crore which is non-existent

c) An understated liability of Rs 1,230 crore on account of funds arranged by me

d) An over stated debtor position of Rs 490 crore (as against Rs 2651 reflected in the books)

2. For the September quarter (Q2) we reported a revenue of Rs 2,700 crore and an operating margin of Rs 649 crore (24 per cent of revenues) as against the actual revenues of Rs 2,112 crore and an actual operating margin of Rs 61 crore (3 per cent of revenue). This has resulted in artificial cash and bank balances going up by Rs 588 crore in Q2 alone.

The gap in the balance sheet has arisen purely on account of inflated profits over a period of last several years (limited only to Satyam standalone, books of subsidiaries reflecting true performance). What started as a marginal gap between actual operating profit and the one reflected in the books of accounts continued to grow over the years. It has attained unmanageable proportions as the size of the company operations grew significantly (annualized revenue run rate of Rs 11,276 crore in the September quarter, 2008 and official reserves of Rs 8.392 crore). The differential in the real profits and the one reflected in the books was further accentuated by the fact that the company had to carry additional resources and assets to justify higher level of operations – thereby significantly increasing the costs.

Every attempt made to eliminate the gap failed. As the promoters held a small percentage of equity, the concern was the poor performance would result in a takeover, thereby exposing the gap. It was like riding a tiger, not knowing how to get off without being eaten.

The aborted Maytas acquisition deal was the last attempt to fill the fictitious assets with real ones. Maytas’ investors were convinced that this is a good divestment opportunity and a strategic fit. Once Satyam’s problem was solved, it was hoped that Maytas payments can be delayed. But that was not to be. What followed in the last several days is common knowledge.

I would like the board to know:

1. That neither myself, not the Managing Director (including our spouses) sold any shares in the last eight years-excepting for a small proportion declared and sold for philanthropic purposes.

2. That in the last two years a net amount of Rs 1,230 crore was arranged to Satyam (not reflected in the books of Satyam) to keep the operations going by resorting to pledging all the promoter shares and raising funds from know sources by giving all kinds of assurances (Statement enclosed, only to the members of the board). Significant dividend payments, acquisitions, capital expenditure to provide for growth did not help matters. Every attempt was made to keep the wheel moving and to ensure prompt payment of salaries to the associates. The last straw was the selling of most of the pledged share by the lenders on account of margin trigger.

3. That neither me, nor the Managing Director took even one rupee/dollar from the company and have not benefitted in financial terms on account of the inflated results.

4. None of the board members, past or present, had any knowledge of the situation in which the company is placed. Even business leaders and senior executives in the company, such as Ram Mynampati, Subu D T R Anand, Kesab Panda, Virender Agarwal, A S Murthy, Hari T, S V Krishnan, Vijay Prasad, Manish Mehta, Murali V, Sriram Papani, Kiran Kavale, Joe Lagioia. Ravindra Penu Metsa, Jayaraman and Prabhakar Gupta are unaware of the real situation as against the books of accounts. None of my or managing directors immediate or extended family members has any ideas about these issues.

Having put the facts before you, I leave it to the wisdom of the board to take the matters forward. However, I am also taking the liberty to recommend the following steps:

1) A task force has been formed in the last few days to address the situation arising out of the failed Maytas acquisition attempt. This consists of some of the most accomplished leaders of Satyam: Subu D, T R Anand, Keshab Panda and Virender Aggarwal, representing business functions, and A.S.Murthy, Hari T and Murali V representing support functions. I suggest that Ram Mynampati be made the Chairman of this task force to immediately address some of the operational matters on hand. Ram can also act as an interim CEO reporting to the board.

2) Merrill Lynch can be entrusted with the task of quickly exploring some merger opportunities.

3) You may have a ‘restatement of accounts’ prepared by auditors in light of the facts that I have placed before you.

I have promoted and have been associated with Satyam for well over twenty years now. I have seen it grow from few people to 53,000 people, with 185 Fortune 500 companies as customers and operations in 66 countries. Satyam has an excellent leadership and competency base at all levels. I sincerely apologize to all Satyamites and stakeholders who have made Satyam a special organization, for the current situation. I am confident they will stand by the company in this hour of crisis.

In light of the above, I fervently appeal to the board to hold together to take some important steps. Mt T R Prasad is well placed to mobilize support from the government at this crucial time. With the hope that members of the Task Force and the financial advisor, Merrill Lynch (now Bank of America) will stand by the company at this crucial hour, I am marking copies of this statement to them as well.

Under the circumstances, I am tendering my resignation as the chairman of Satyam and shall continue in this position only till such time the current board is expanded. My contribution is just to ensure enhancement of the board over the next several days or as early as possible.

I am now prepared to subject myself to the laws of the land and fact the consequences thereof.

(B. Ramalinga Raju)

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