Satyam heads towards disaster with Rs 8,000 cr fraud

In the country's biggest corporate fraud involving about Rs 8,000 crore, iconic IT company Satyam was on Wednesday hurtling towards disaster following the shocking disclosure of accounts fudging by its founder Ramalinga Raju, who then quit as chairman - leaving an uncertain future for the company and its 53,000 employees.

By the end of the day, the fourth largest IT company lost a staggering Rs 10,000 crore in market capitalisation as investors reacted sharply and dumped shares, pushing down the scrip by 78 per cent to Rs 39.95 at BSE before touching Rs 30. The NYSE-listed firm could also face regulator action in the US.

The government, regulator SEBI and the industry reacted with shock and anguish over the turn of events that could tarnish India's corporate and raise vital issue like ethics, corporate governance and accounting and business practices.

Acting in tandem, Corporate Affairs Ministry and SEBI announced that the episode would be probed and action taken against the perpetrators of the fraud that entails inflating profits and creating fictitious assets.

"I am now prepared to subject myself to the laws of the land and face consequences thereof," Raju said in a letter to SEBI and the Board of Directors, while giving details of how the profits were inflated over the years and his failed attempts to "fill the fictitious assets with real ones."


The Maytas firms, although promoted by his family, proved to be his nemesis, with Raju saying: "The aborted Maytas acquisition deal was the last attempt to fill the fictitious assets with real ones... But that was not to be. What followed in the last seven days is common knowledge."

While the government said the entire issue would be referred to the Serious Fraud Investigation Office, SEBI described it as an event of "horrifying magnitude."

Wonder what will happen to the image of India IT market and India IT job market?

Keep well,

Cheers!

How did Ramalinga Raju come up with the name Maytas? He just reversed Satyam name.
Some of the Indian tv channels are reporting, as Raju claims, only he and his wife knew abt the fraud, no one else. Hard to believe. PWC knew it too along with Raju's sons.

But, Satyam may not be the only one


Chartered accountants say, what is strange about the case is that Satyam was trying to show bloated revenues of 24 per cent (Rs 649 crore figure of September 2008 quarter), when actually his margin was only 3 per cent (Rs 61 crore). This is in line with his competitors Infosys and TCS, who also work on the same margin of around 20-25 per cent.

But, what is strange is why revenue margin of Satyam so thin as compared to his peers, or is it that the actual margins are low.

Usual business practice is that revenues are deliberately shown less, say 3-5 per cent and the rest is siphoned off by promoters for personal gains. Here the story is completely reverse, explain chartered accountants.

Stock market pundits, who recommend stocks like Satyam and others for investment, admit that window dressing balance sheet is not unique to India. The US takes a lead in this. The balance sheet of Lehman Brothers never existed and still people made investments through them. Most companies listed on the stock exchanges across the world do window dressing of their accounts, purely to get more investment, pull up stock price, attract more business etc.

Satyam is not unique in the matter and it is not alone in committing this fraud if every Indian company is put on a scanner independently then there will be bigger frauds unravelling.

Investors better watch out!

http://www.tribuneindia.com/2009/20090108/biz.htm#5

Indian Express is reporting that there may be 10,000 axed from Satyam.


http://www.expressbuzz.com/edition/story.aspx?Title=Satyam+may+axe+10,000+employees:+Report&artid=5cvNJTBLU2g=&SectionID=XT7e3Zkr/lw=&MainSectionID=XT7e3Zkr/lw=&SEO=Satyam;+Satyam+interim+CEO;+Ram+Mynampati;+employe&SectionName=HFdYSiSIflu29kcfsoAfeg==