Satyam Scam Mineee

8/8/2019 Satyam Scam Mineee

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Presented By :- Shalu Tomar

AnkurArvinder Singh

Neha

Saurabh

Mukesh

Presentation on Satyam Scam

The Hidden Truth





Satyam ± The company

Fourth largest Indian IT Company listed in India & US Over US $ 2 billion annual revenue size Co

Established in mid 1980s, grown to 53,000 employees;

600 plus customers including 185 fortune 500 Cos

Operations in 66 countries across the globe Financial advisor: Merrill Lynch (now Bank of America)

Auditors: Price Water House Coopers

Bankers: ICICI, Citi bank & HDFC.

Satyam has strategic technology and marketing allianceswith over 50 companies.

Apart from Hyderabad, it has development centers inIndia at Bangalore, Chennai, Pune, Mumbai, Nagpur,Delhi, Kolkata, Bhubaneswar, and Visakhapatnam.



SATYAM :- Fraud Facts

Satyam is the biggest fraud in India's corporate history.

Just few months ago, India's fourth-largest software servicesexporter, Satyam Computer Services received a Golden PeacockGlobal Award from a group of Indian directors for excellence in

corporate governance. Ramalinga Raju himself was the recipient of many an award for

corporate governance and transparency

The fraud has brought to light the fact that in India thedistinction between owners and management is still not veryclear.

Where the owners are also the managers, such frauds arealways a possibility.



Why satyam goes down ? why satyam

is in scandal«?

Satyam Computers had on December 16, 2008, announced that it will

acquire two group firms - Maytas properties and Maytas Infrastructure

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 deal is not profitable for investors .So after this announcement they

started to raise their voices against the deal

The company is run by the sons of Ramalinga Raju

It 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



CURRRENT ASSETS

LIABILITIES

ACTUAL DEBT

WAS 2161

OVERSTATED

490 CR.ACTUAL CASH IN

BANK WAS 321

INFLATED 5040

CR.

NO ACCRUED

INTEREST 376.34

CR.

UNDERSTATED

LIABILITY 1230

Cr. Which was

ARRANGED BY

MR.RAJU5040+376+1230+490

= 7136 CRORE

Balance sheet of the Co. As ON 30 SEPTEMBER 2008

What Satyam Scam Is..?



How did Satyam scam happen?

Ambitious growth drive

Audit failure- example., External confirmations of Bank

balances not properly done by PWC

Deceptive reporting practiceslack of transparency ESOPs issued to those who prepared fake bills

Excessive interest in maintaining stock prices

High risk deals that went sour Above all, greed and lack of ethical values.





Confession January 7th , 2009

The following statement he made in his confession letter

Every attempt to eliminate the (balance sheet) gap failed.



Chairman Rajus Version

On 7 January 2009, companys previous Chairman RamalingaRaju resigned after notifying board members and the Securities

and Exchange Board of India (SEBI) that Satyam's accounts had

been falsified

Inflated billing to customers

Non-existent cash & bank balances $ I bn

Overstated Debtors $ 100 million

Operating margin shown high at 24% in Q2 (Sept 2008) as

against 3% real profit margin Such manipulation done in earlier years( 6 yrs-$ 1.2 Bn)

Increased costs to justify higher level of operations

Attempt to merge Sons Company Maytas with huge land Bank

to bridge the gap failed



Consequences of confession

Investors- Panicked as Stock plummeted &Class action suits filed in US

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 Government- worried about image of the Nation & IT

Sector affecting faith to invest or to do business



Action after Confession

Chairman, MD and CEO, CFO, Chief accountant and two

of his associates arrested

Two Partners of PW (Audit Firm) were also arrested

Options before Government: i. Allow market forces todecide; ii. Announce bail out plan; iii. Think out of the box

Government dissolved existing Board &

nominated 6 of us

Gave us complete freedom



Who is guilty in this sordid state

of events?

But there were others who are

also culprits.

SATYAM SCAM: SO WHOM IS TO

BLAME`



So what were the auditors, PricewaterhouseCoopers,

doing?

SATYAMS AUDITORS There was no cashwith in the company'sbanks and yet theauditors went ahead

and signed on thebalance sheets sayingthat the money wasthere. Not just the cash, eventhey even signed off on

the non-existentinterest that accrued onthe non-existent cashbalance! The company officialssaid they relied on datafrom the reputedauditors.



THESEBI

The Securities and Exchange Board of India, which says it is 'horrified at themagnitude of the fraud' had inDecember given a clean chit to Satyam saying that it had not found any

violation of norms relating to takeoverand corporate governance in itspreliminary surveillance of the dealinvolving the acquisition of Maytas Infraby Satyam Computer Services.

Therefore, the probe would be limitedto the deal between the two listedentities -- Satyam and Maytas Infra --and not cover the one involving Satyamand unlisted firm Maytas Properties.



Directors and independent directors

The role of the company's directors, includingindependent directors, in the entire episodetoo has been exposed after the Satyamepisode.

Most of them essentially remain 'nodders' inthe boardroom and agree to whatever themanagement or the promoters want to pushthrough.The Satyam board, including its fiveindependent directors had approved thefounder's proposal to buy 51 per cent stake inMaytas Infrastructure and all of Maytas

Properties, owned by the family members of Satyam chairman B Ramalinga Raju.Despite the shareholders not being taken intoconfidence, the directors went ahead with themanagement's decision.



The government, on its part, was perhaps too

busy projecting the stellar show of the Indian IT

sector and did not find it necessary to launch anenquiry into these 'complaints,' so to speak.

Thus by way of negligence the government too is

equally guilty in not having managed to save the

shareholders, the employees and some clients of the company from losing heavily.

Govt. is also guilty



Bidding Process

Press release on 9th March inviting registration

RFP was sent to 141 registered- only 10 submitted EOI

Out of 10, 7 met the criteria and were sent documents

for execution 5 submitted documents but later 2 withdrew for want of

internal approvals leaving 3 in race

Thus, WL Ross; L&T and Tech Mahindra competed

Information had to be given to Bidders to facilitate

quoting price per share for preferential allotment



Ø Tech Mahindra is paying Rs1757 crore

for a 31% stake in the company, or Rs 58per share.

Ø 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.

Ø In India this moment was full of praise

for the manner and speed with which the

reconstitutedboard of Satyam Computer

Services found a strategic investor .

Tech Mahindra wins bid for Satyam

Scam

Who won The race..???



What management should 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 pro jects.

The image of the company could be revived by a

series of press conferences highlighting the

on going contracts with the clients.

It could also be merged with any other software

company.



Documents

Satyam Scam Mineee