index Introduction to satyam computers, maytasinfra & maytas propertiesSatyam-maytas fiascoWhy raju was failedConfession of rajuHow did he cook the balance sheet Who is to be blame!!What was possible solution ..?Current status of company

IntroductionSatyam Computer Services Ltd. is a

consulting and information technology services company based in Hyderabad, India .

It was found in 1987 by B.Ramalinga Raju.The company offers information technology

(IT) services spanning various sectors, and is listed on the New York Stock Exchange and Euronext

It is considered as an icon among the IT companies and at one point had over a billion dollar revenue

Satyam's network covers 67 countries across six continents.

The company employs 40,000 IT professionals across development centers in India, the United States, the United Kingdom, the UAE, 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.

Satyam Maytas FiascoSatyam Computers had on December 16,

2008, announced that it will acquire two group firms - Maytas properties and Maytas Infra

The BOD of Satyam had approved the founders proposal to buy 51 per cent stake in Maytas Infrastructure and 100 % in Maytas Properties.

The total outflow for both the acquisitions was expected to be US$ 1.6 bn comprising of US$ 1.3 bn for the 100% stake in Maytas Properties and US$ 0.3 bn for the 51% stake in Maytas Infra.

This is the move that sparked a row over alleged violation of corporate governance laws.

This deal is not profitable for investors .So after this announcement they started to raise their voices against the deal

Maytas InfraThe company is run by the sons of Ramalinga

RajuIt was started in the late 1980s by Ramalinga

Raju The main reason for the debacle of Maytas

Infra is due to the debacle of Satyam

Maytas Properties LtdOne of the reasons for the debacle of Maytas

properties is the ongoing economic slowdownThe company has huge land banks and the

prices have dropped down in the real estate significantly

Satyams justification for Maytas buyout dealde-risk the core businessthe integrated organization would be stronger

and more diversified to deal with the uncertainty of the market.

feeling that in the recent times it is difficult to make a strategic deal with other IT companies.

Reaction of Investors after the announcement of accusation of MaytasInvestment giant Templeton and brokerage

house CLSA opposed to this decision.

Result of Investors ReactionIt results that part of investors succeeded to

thwart an attempt by the minority-shareholding promoters to use the firms cash reserves to buy out two companies owned by them Maytas Properties and Maytas Infra.

That aborted attempt at expansion precipitated a collapse in the price of the companys stock and a shocking confession of financial manipulation and fraud from its chairman, B. Ramalinga Raju

Company announced Acquisition of 51% stake in Maytas Infra and 100% stake in Maytas Properties on 16th Dec 2008 but were unsuccessful.

WHY HE FAILED????

The promoters decided to inflate the revenue and profit figures of Satyam. In the event, the company had a huge hole in its balance

So to fill up this gap..

This was mainly done to hide the irregularities in the accounts of Satyam

It is also said the close association with the political leaders is one of the reasons.

The deal was not profitable for investors Investors dumped Satyams stock and threatened action against the management.Satyam Computer ADRs took a huge

The following statement he made in his confession letter Every attempt to eliminate the (balance sheet) gap failed.

.

He tried to fill the gap b/w actual profits of the company and the profits that were shown in records, balance sheets etc. and also tried to cope up the situation till last minute . But now the situation were beyond his hands and thereforehe confessed the frauds(on Jan 7, 2009)made by him by showing inflated profits in the balance sheet

According to theconfessional statement of Mr. Raju, the balance sheet shortfall was more than

Confession

FINANCIAL FINANCIAL SHENANIGANSSHENANIGANS

WHAT WENT WRONG?

Simple manipulation of revenues and earnings To show superior performance

Raising fictitious bills for services that were never rendered.

To increase the Cash & bank balance correspondingly.

Operating profits were artificially boosted from the actual Rs 61 crore to

Its financial statements for years were totally false, cooked up and...

Never had Rs 5064 crores (US$ 1.05 Billion) shown as cash for several years.

Its liability was understated by $ 1.23 Billions

The Debtors were overstated by 400 millions plus.

The interest accrued and receivable by

AND HOW.?????

5312.62

ACTUAL CASH IN BANK WAS

321INFLATED

5040cr2651.6

ACTUAL DEBT WAS 2161OVERSTATED 490 Cr

CURRENT ASSESTS

376

NO ACCRUED INTEREST

376 Cr

UNDERSTATED LIABILITY 1230

Cr which was arranged by

Mr.Raju

5040+376+1230+ 490= 7136

LIABILITIES

ARTIFICIALLY ADDED 588OPERATING PROFIT

ADDED 588INCREASING THE CASH RESERVE ONLY FOR Q2

ALONE TO 588

ACTUAL OPERATING MARGIN 61 Cr REPORTED-649 Cr( CREATED AN ARTIFICIAL

REVENUE OF 588)

GROWTH IN THE OPERATING PROFIT

INFLATING THE PROFIT AND REVENUE

Satyam scam: So who is to blame?

Who is guilty in this sordid state of events?

Raju is by far the father of this fraud.

But there were others who are also culpable.

Satyam's auditorsSo what were the auditing company,Pricewater houseCoopers, doing?

PwC has written a letter to the BOD of Satyam that its audit may be rendered "inaccurate and unreliable" due to the disclosures made by Satyam's (ex) Chairman.

Is it real? How could Auditors miss the gaping Auditors do bank reconciliation to check

whether the money has indeed come or not.They check bank statements and certificates. So was this a total lapse in supervision or were

the bank statements forged? No one knows yet.

The company officials said they relied on data from the reputed auditors.

The promoters Since the promoters, in this case, held only about 8 percent shares, their idea to push through the Maytas acquisition deal was defeated by an angry lot of shareholders.

Other company bigwigs

Satyam's CFO Srinivas Vadlamani has already been arrested.

But could only two or three people have managed to cook the books for years of a company so large? Highly unlikely.

The SebiThe Sebi had in

December given a clean chit to Satyam in the probe on violation of corporate governance law.

The bankersIf the auditors were

conned, it means that either the bank statement and certificates were forged

Satyam's banks -- ICICI Bank, HDFC Bank, Bank of Baroda, etc

Directors and independent directors

Despite the shareholders not being taken into confidence, the directors went ahead with the management's decision.

The governmentThe government too is equally guilty in not having managed to save the shareholders, the employees and some clients of the company from losing heavily.

What Management What Management could do??could do??Change the name of the company.Reconstitution of the board :- Restore the management of the company and

appoint some reputed people as the board of directors.

Try building confidence in the clients to get back the lost projects.

The image of the company could be revived by a series of press conferences highlighting the ongoing contracts with the clients.

It could also be merged with any other software company.

Tech Mahindra is paying Rs1757 crore for a 31% stake in the company, or Rs 58 per share. Satyam Computer Services has now zoomed 15% to Rs 54.20 ahead of the announcement of the highest bidder for the company on April 13, 2009.In India this moment was full of praise for the manner and speed with which the reconstituted board of Satyam Computer Services found a strategic investor .

Tech Mahindra wins bid for Tech Mahindra wins bid for Satyam Scam Satyam Scam

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