SATYAM SCANDAL

presented by-

HARSHADA CHAUDHARI

BHUSHAN GANG

KOMAL RATHOR

CONTENTS

MANAGEMENT BOARDCOMPANY PROFILE & GLOBAL

PRESENCESERVICES PROVIDEDACHIEVEMENTSSCANDALLETTER TO THE BOARDIMPACT ON MARKETINDIA’S STEP TO SAVE SATYAMLESSONS LEARNEDTAKEOVER

Founders- Mr. B. Ramalinga Raju (Chairman) Mr. B. Rama Raju (Co-Founder & CEO)*

Non-Executive Directors: Mr. V. P. Rama Rao, IAS (Retd.) Dr. (Mrs.) Mangalam Srinivasan Prof. Krishna G. Palepu Mr. Vinod Dham

* The Current CEO is Mr. A. S. Murthy

MANAGEMENT BOARD

Satyam was established in 1987 in HyderbadThe firm began with twenty employees and

grew rapidly as a global business.4th fastest growing IT company in India.9 % market share40,000 employeesRevenue $2.1 billion It is the first company of India listed in three

International Exchanges i.e. NYSE, DOW JONES and EURONEXT

COMPANY PROFILE

Satyam's network covers 67 countries across six continents. The company employs 53,000 IT professionals across development centers in India, the United States, the united kingdom, the united Arab Emirates, Canada, Hungary, Singapore, Malaysia, China, Japan, Egypt and Australia. It serves over 654 global companies, 185 of which are Fortune 500 corporations. Satyam has strategic technology and marketing alliances with over 50 companies. Apart from Hyderabad, it has development centers in India at Bangalore, Chennai, Pune, Mumbai, Nagpur, Delhi, Kolkata, Bhubaneswar, and Visakhapatnam

GLOBAL PRESENCE

Aerospace and Defense Banking, Financial Services &Insurance Energy and Utilities Life Sciences & Healthcare Manufacturing, Chemicals & Automotive Public Services & Education Retail and Consumer Packaged Telecom, Infrastructure, Media and Entertainment &

Semiconductor Travel and Logistics & Industrial Equipment

Povides Services in the Following Areas:

o Becomes the 1ST Asian Company to Features in the Training Magazine’s List of Top 125 COMPANIES for Learning.

o Won Corporate Governance (INCLUDING GOLDEN GLOBAL AWARD TWICE).

o First Indian it company to get ITAA certification for Y2K solutions.

o Satyam Infoway is the first Indian internet company to be listed on NASDAQ

o Declared one of the hundred most pioneering technology companies by world economic forum in the year 2000.

o First Organization in the World to Launch Customer Oriented Global Organization Training.

o First ISO:9001:2000 Company in the World as Certified by BVQI.

ACHIEVEMENTS

On 7th January 2009, Wednesday, Satyam Computer Serv ices Cha irman B.Ramal inga Ra ju res igns and d isappears a f ter confess ing to the largest f raud of Rs . 7 ,136 crore in Ind ian corporate h istory.

In a let ter to the board , there was Miss ing cash/bank ba lance of Rs . 5040 crores p lus miss ing interest income of Rs . 376 crores p lus understated l iab i l i t ies o f Rs . 1230 crores p lus overstated dues to company of   Rs . 490 crores add ing i t up Rs. 7136 crores was tota l miss ing amount .

SCANDAL

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.

AN OVERSTATED DEBTORS POSITION OF RS. 490 CRORE (AS AGAINST RS. 2651 CRORE REFLECTED IN THE BOOKS)

SR NO.

INFLATED FIGURES EFFECT IN BALANCE SHEET

1. Inflated (non-existent) cash and bank balances of Rs. 5,040 crore.

The cash will be reduced by Rs.5040 crore and second effect would be reduction from reserve (1)

2. An accrued interest of Rs. 376 crore, which is non-existent

Accrued interest will be reduced by Rs. 376 crore and second effect would be reduce from reserve (2)

3. An understated liability of Rs. 1230 crore on account of funds arranged by him.

The liability will increase and the second effect would be reduction from reserve (4)

4. An overstated debtors position of Rs. 490 crore (as against Rs. 2651 reflected in the books)

Debtors will be reduced by Rs.490 crore and second effect would be reduction from reserve (3)

FOR THE SECOND QUARTER SATYAM REPORTED A REVENUE OF RS.2700 CRORE AND AN OPERATING MARGIN OF RS.649CRORE (24% OF REVENUES) AS AGAINST ACTUAL REVENUE OF RS.2112 CRORE AND AN ACTUAL OPERATING MARGIN OF RS.60 CRORE (3% OF REVENUES)

THIS HAS RESULTED IN ARTIFICIAL CASH AND BANK BALANCES GOING UP BY RS. 588 CRORE IN Q2 ALONE.

• PricewaterhouseCoopers(PwC) was the statutory auditor of Satyam Computer Services when the report of scandal in the account books of SatyamComputer Services was broke out. The Indian arm of PwC was fined $6 million by U.S. Securities and Exchange Commission for not following the code of conduct and auditing standards while pursuing its duties while auditing the accounts of SatyamComputer Services

• 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 (US$3 million) every month for paying these 13,000 non-existent employees

FOR SEPTEMBER QUARTER (Q2) REVENUE AND OPERATING MARGIN

ARTIFICIAL CASH AND BANK BALANCE GOING UP BY RS 588 CRORES IN Q2 ALONE

EVERY ATTEMPT TO ELIMINATE THE GAP FAILED THE ABORTED MAYTAS ACQUISITION DEAL SHARES WERE NOT SOLD IN THE LAST 8 YEARS NET AMOUNT OF RS 1230 CRORE WAS ARRANGED TO

SATYAM IN THE LAST 2 YEARS NONE OF THE BOARD AND THE FAMILY HAD KNOWLEDGE APOLOGISED RESIGNED AS THE CHAIRMAN PREPARED TO FACE CONSEQUENCES

LETTER TO THE BOARD

Merrill Lynch terminated its engagement with Saytam

Contarct of Satyam as were terminated with tresis and world bank and investors were scared.

Credit Suisse suspended its coverage of Satyam

PricewaterhouseCoopers came under intense scrutiny and its license to operate may be revoked.

Awards won by Satyam were strippedAs result major fall in shares and fall in share

prices of around 100 companies varying between 5‐15%.

IMPACT ON MARKET

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.[14] In New York Stock Exchange Satyam shares peaked in 2008 at US$ 29.10; by March 2009 they were trading around US $1.80.

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.

VICTIMS OF FRAUD

INVESTORS - Panicked as Stock plummeted & Class action suits filed.

EMPLOYEES - Stranded in many ways- morally, financially, legally and socially.

CUSTOMERS - Shocked and worried about the project continuity, confidentiality and cost over run.

BANKERS - Concerned about recovery of financial and non-financial exposure and recalled facilities.

It Was Like Riding A Tiger, Not Knowing How To Get Off Without Being Eaten - Ram Raju

FINAL WORDS

INDIA’S STEP TO SAVE SATYAM

The Indian Government had stated that it may provide temporary direct or indirect liquidity support to the company.

Satyam is seeking bank loans to help cover salaries and other operating expenses

On 5 February 2009, the six-member board appointed by the Government of India named A. S. Murthy as the new CEO of the firm with immediate effect. Murthy, an electrical engineer, has been with Satyam since January 1994 and was heading the Global Delivery Section before being appointed as CEO of the company. The two-day-long board meeting also appointed Homi Khusrokhan (formerly with Tata Chemicals) and Partho Datta, a Chartered Accountant as special advisors.

Satyam’s fraud spurred the government of India to tighten corporate norms to prevent recurrence of similar frauds in future. The government took action to protect the interest of the investors and safeguard the credibility of India and the nation’s image across the world.

It has forced the government to re‐write corporate governance rules and tighten the norms for chartered accountants.

The Committee therefore recommends that a qualified and independent audit committee should be set up by the board of a company. This would go a long way in enhancing the credibility of the financial disclosures of a company and promoting transparency

LESSONS LEARNED

TAKE-OVER

ON 13TH APR 2009, VIA FORMAL PUBLIC AUCTION PROCESS, 46% STAKE IN SATYAM WAS PURCHASE BY MAHINDRA.

POSTED RS2890 CRORE AS TAKEOVER

JULY 2009, SATYAM REBRANDED ITS SERVICE AS “MAHINDRA SATYAM”.

NOW IT BECAME “TECH MAHINDRA” EFFECTIVE FROM 26 JUNE 2013 WITH MERGER APPROVAL BY ANDHRA PRADESH & MAHARASHTRA HIGH COURTS.

THANK YOU