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TOPIC - Satyam Scam

GROUPMEMBERS

-Gopal Kumar-Prashant -Karamveer-Santosh-Maboti-Harish-Ravi

Intoduction of Satyam Computer

•Satyam Computer Services Limited was founded in 1987 by Mr. B Ramalinga Raju.

•The company offers consulting and information technology services spanning various sectors, including engineering and product development, supply chain management, client relationship management, business process management and business intelligence.

The company was listed with New York stock exchange, National stock exchange, and the Mumbai stock exchange. In June 2009, the company unveiled its new brand identity “Mahindra Satyam”

Who is B. Ramalinga Raju?

-Ramalinga Raju was 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.

-Satyam was until recently perceived to be amongst the top Indian IT vendors.

-Raju has admitted to overstating the company's cash reserves by USD$ 1.5 billion. Later, a person involved in the investigation of the company said that the company's assets were not inflated, but instead siphoned off by Ramalinga Raju.

-Raju is currently held in Hyderabad's Chanchalguda jail on criminal charges including fraud, forgery, cheating, embezzlement and insider trading.

“The Entire Story”-Ramalinga Raju founded Satyam Computers

in 1987 and was its Chairman until January 7, 2009 when he resigned from the Satyam board after admitting to cheating six million shareholders.

-After being held in Hyderabad's Chanchalguda jail on charges including cheating, embezzlement and insider trading. -Raju was granted bail on 25.3.2011. Raju was granted bail on condition that he should report to the local police station on a day and that he shouldn't attempt to tamper with the current evidence

-A botched acquisition attempt involving Maytas in December 2008 led to a plunge in the share price of Satyam.

-In January 2009, Raju indicated that Satyam's accounts had been falsified over a number of years.

-He admitted to an accounting dupery to the tune of 7000 crore rupees or 1.5 Billion US Dollars and resigned from the Satyam board on January 7, 2009.

What crime he has constituted

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 Maytas

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 crore rupees every month for paying these 13,000 non-existent employees.

-In Venture Global Engineering vs Satyam Computer Services Ltd 2010 (8) SCC 660 On being questioned by criminal investigation department of the Andhra Pradesh police, Mr. Raju reportedly admitted to using Satyam (respondent no.1) money for buying prime land in and around Hyderabad.

-Ten Imaginary fixed deposits Raju admitted that Satyam’s fixed deposits which supposedly grew from Rs. 3.35 crore in 1998-99 to a massive Rs. 3320.19 crore in 2007-08 are all fake.

Reasons for Satyam Scam:-

1. Raju wanted to take over his MAYTAS INFRA and MAYTAS PROPERTIES.(company of his sons).

2. He was blamed that he was using the funds of the investors for the family business.

3. World bank had banned the satyam to take any services for 8 years (due to illegal profit and lack of essential document).

HOW THIS SCAM HAS RELATION WITH “MAYTAS”

-Maytas refers to a group of companies founded by B. Ramalinga Raju. It includes Maytas Properties and Maytas Infra Limited.

-A property development company founded in 2005.

-Maytas Infra Limited: An infrastructure development, construction and project management company. Maytas Infra was originally run by Satyam Computer Services founder B Ramalinga Raju.

-It came under the scanner due to its association with B. Ramalinga Raju.

-Various agencies, including the state Crime Investigation Department, probed the Maytas affair after B Ramalinga Raju admitted to serious financial scam in Satyam Computer.

-There were allegations that funds from Satyam were diverted to Maytas, causing the Government agencies to verify the infrastructure company’s records as well. .

“CONSEQUENCES”• Before the scandal it’s 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

• SEBI, the stock market regulator, also said that, if found guilty, its license to work in India may be revoked.

•The New York Stock Exchange has halted trading in Satyam stock•India's National Stock Exchange has announced that it will remove Satyam from its S&P CNX Nifty 50-share index.•Satyam's shares fell to 11.50 rupees on 10 January 2009, their lowest level since March 1998, compared to a high of 544 rupees in 2008.

•Present time it’s share price is 107.89. Mahendra Satyam’s market growth is 7,800crore.

•Before the scandal Satyam was the 4th ranked among IT companies of India and on 9th jan2009 it became least valuable IT company in India.

“IMPACT OF SATYAM SCAM ON INDIAN ECONOMY”

• Although several companies are trying to have a bite into Satyam Computers, according to Gartner study, the company is likely to exist in its current form. It is expected to discontinue some of its businesses, service lines or cease to exist in certain geographies.

• Huge losses to investors aside, the Satyam scandal has caused “serious damage” to India Inc’s reputation as well as the country’s regulatory authorities outside.

•The Government certainly cannot remain aloof and allow Satyam to die off especially when it provides occupation to 53,000 odd people and indirectly supports more than a million Indians.• The Satyam scam effect has started its infectious presence. U.S. listed stocks of other Indian companies  have started taken a severe beating.• Indian firms are looking into methods to avoid scenarios of such scams within their companies.

IMPACT ON STOCK MARKET

-THE SHARE PRICE OF SATYAM WAS FALL DOWN TO 21.3%.

-THE BENCHMARK SENSEX SLIPPED OVER TO 7% ON 7 JANUARY 2009.

-SATYAM STOCK IS BEING REMOVED FROM ITS S&P CNX NIFTY 50-SHARE INDEX .

-SATYAM’S LARGEST SHAREHOLDER, ABERDEEN AMC, DUMPED THE TAINTED SOFTWARE ENTITY’S SHARES.

ACQUISITION BY MAHINDRA GROUP

-ALL WELL THAT’S END WELL.-ANAND MAHINDRA – NEW OWNER OF SATYAM-POST RS2890 CRORE AS TAKEOVER

-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”.

Changes after the scandal

1. The appointment of the CFO is to be approved by the Audit Committee after assessing the qualifications, experience and background of the candidate. The SCODA did not find it necessary to prescribe particular professional qualifications for the CEO.

2. Rotation of audit partners every five years. The SCODA did not go down the path of insisting on rotation of audit firms.

3. Voluntary adoption of International Financial Reporting Standards (IFRS) by listed entities, so as to ensure a state of preparedness by 2011 when the Indian standards are expected to be converged with IFRS.

4. Interim disclosure of balance sheets (audited figures of major heads) on a half-yearly basis.

5. Streamlining of timelines for submission of various financial statements by listed entities as required under the listing agreement.

SOURCES

•Wikipedia •Books

Thank you