ETHICAL ISSUES IN ETHICAL ISSUES IN SATYAMSATYAM

Saga of Decline Of IT MajorSaga of Decline Of IT Major

INTRODUCTION & INTRODUCTION & ACHIEVEMENTSACHIEVEMENTS

•Founded By Mr. B.Ramalingam Raju in Founded By Mr. B.Ramalingam Raju in 19871987

•44thth fastest growing IT company in fastest growing IT company in India.India.

•9 % market share9 % market share

•53,000 employees with revenue $2.1 53,000 employees with revenue $2.1 billionbillion •It is the first company of India listed in It is the first company of India listed in three International Exchanges i.e. three International Exchanges i.e. NYSE, DOW and EURONEXTNYSE, DOW and EURONEXT

AWARDS 2007-08AWARDS 2007-08EVERYTHING WAS GOING FINEEVERYTHING WAS GOING FINE

Asian MAKE (Most Admired Knowledge Asian MAKE (Most Admired Knowledge Enterprise) AwardEnterprise) Award

SAP Pinnacle Award 2008 under “Service – SAP Pinnacle Award 2008 under “Service – Ecosystem Expansion (Growth)” categoryEcosystem Expansion (Growth)” category

Citizenship Partner of the Year Award, Citizenship Partner of the Year Award, 20072007

Second-Best Employer in India Second-Best Employer in India

The only IT Services company from India in The only IT Services company from India in the list of the TOP 20 Best Employers in the list of the TOP 20 Best Employers in Asia Asia

THEN CAME THE TURNING THEN CAME THE TURNING POINTPOINT

(MAYTA’S ACQUISITION (MAYTA’S ACQUISITION PROPOSAL)PROPOSAL)

Maytas – A Hole in the Maytas – A Hole in the ShipShip

It all started on 16.12.2008, when Ramalinga Raju thought, buying an infrastructure firm made sense!

He, then, nailed a hole in a sinking ship Satyam was. It is a common affair in Indian Inc to make such pointless investments to divide the dividends by manipulating profit margins. Satyam’s Maytas bid dragged media in to it. Satyam intended to buy entire stakes in Maytas Properties for $1.3 Billion and 51% stakes in Maytas Infra for another $300 Million. Raju and his immediate family members own up to 35% stakes in Maytas. The deal was to be financed from “surplus” cash.

Investors and the Fund managers were shocked that the bidding process was carried without informing them.  Raju said that the deal was in complete interest of the investors and informing them was “unnecessary”.

On following days, Satyam’s share prices started falling reflecting share holders disbelief.

MAYTAS – A HOLE IN THE SHIPMAYTAS – A HOLE IN THE SHIP

Satyam’s share prices fell in U.S.A. after the bid was announced. The interrogation by investors forced Raju to reconsider his decision, which he pulled off within hours. World Bank, one of Satyam’s esteemed customers banned it from providing service for next 8 years.

Satyam’s image in front of its customers, investors, and more importantly, the entire nation got dented.

Share prices tumbled even further by about 16%. The aborted buy-out deal and the ban indicated that something seriously went wrong at the board level.

Valuation of Maytas turned out to be fraudulent. All of the four Firms, including Merry Lynch and JP Morgan denied having done any Valuation. The move sparked row between the institutional investors from across the world and Satyam’s board members,

One of company’s two independent directors T.R. Prasad defended the decision of buy-out believing it to be increasing share value, Another director Mr. Shrinivasan quit before it was too late.

Vinod Dham was also one of the non-executive directors of Satyam who later resigned in the wake of controversy. Two days after the controversial deal, Indian government ordered separate probe in to the matter

On 7th January, Ramalinga Raju wrote a letter to all the board members and SEBI, informing them about inflated cash, faked profit margins and accounting malpractices

INDIA’S ENRONINDIA’S ENRON77THTH JAN 2009 JAN 2009

SATYAM’S CHAIRMAN ADMITTED SATYAM’S CHAIRMAN ADMITTED FRAUDFRAUD

Decline Decline

of of

India’s India’s

First First

ITIT

MultinationMultination

alal

OTHER ISSUESOTHER ISSUES(WORLD BANK BAN & UPAID LAWSUIT)(WORLD BANK BAN & UPAID LAWSUIT)

The World Bank had banned Satyam from doing business with it for 8 years due to inappropriate payments to the World Bank's staff. The World Bank accused Satyam of giving improper benefits to its (the Bank's) staff and of failing to maintain documentation to support fees charged for its subcontractors.

UK mobile payments company Upaid Systems has sued Satyam for over 1 billion US dollars on complaints of fraud, forgery and breach of contract.

OTHER ISSUES CONT..OTHER ISSUES CONT..

Company claims of 53,000 employees in 2008 but there’s a doubt somewhere on this figure also. Some says the actual number is 41,000 and rest 12,000 are ghost employees which are shown to gain Tax advantages. Govt. is investigating as there’s still more to come

QUESTIONS TO BE RAISEDQUESTIONS TO BE RAISED1. Is it really that easy to show non existent bank

balances worth Rs. 5000 crores

2. Should we believe that bank balances never existed?

3. Is Satyam scandal just about a promoter manipulating the financial statements of his company to show a superior performance?

4. What about Satyam’s customer’s?

5. Will Satyam face more Lawsuits?

6. What about External Auditor Pricewaterhouse coopers?

QUESTIONS TO BE RAISEDQUESTIONS TO BE RAISED

7. What is going to be the fate of Ramalingam Raju?

8. What can be done to prevent these type of Frauds in future?

FUTURE OF SATYAM ?FUTURE OF SATYAM ?

What Lies ahead in the Womb of What Lies ahead in the Womb of future for Satyam Computer future for Satyam Computer

services?services?

ANALYSIS OF FUTURE ANALYSIS OF FUTURE EVENTSEVENTS

CURRENT UPDATECURRENT UPDATECOMPANY’S IN RACE COMPANY’S IN RACE

CURRENT UPDATE CONT…CURRENT UPDATE CONT…

IBM has decided not to bid for Satyam

Spice group still undecided and has already threatened to quit

Larsen & Toubro is facing slowdown in business

Tech Mahindra is looking forward for acquisition

Government is not interested at all in take over