Satyam Saga

Satyam sagaAn overview…..

Vikas Varma

An introduction

about Corporate

Governance

Corporate governance means a system by which corporate entities are under control and are directed

ECONOMIC

Social

Environment

FEATURES

• A system & process which embraces organizational structure

• Ensures that company works in the best interest of stakeholders

• Denotes direction and leadership• Explains the relationship between

directors , owners & managers

• It attempts to put a check on working of an organization

• Holds the balance between economic and social goals

• It ensures timely flow of all information to board of directors

Corporate Governance a brief explanation

by Mr. Godrej

SATYAM The story begins…..

1987 Incorporated as

private

limited company

1991

Recognized as a public

limited company;

and First Appeared on the

Bombay Stock Exchange

(BSE)

1993

Satyam signs joint venture

with Dun & Bradstreet for IT

Services Awarded ISO 9001

Certification

1999

Satyam Infoway (Sify) becomes

the first Indian Internet company

listed on NASDAQ Satyam forms joint venture with

TRW Inc. Presence established in 30

countries

2000

Satyam receives National

HRD Award from Indian

government Dataquest names

Ramalinga Raju IT Man

of the Year

2001 - 2002

Satyam becomes world’s first

ISO 9001:2000 company Headquarters established in

Singapore Satyam BPO launched in

Hyderabad

2008

Adopts new tagline

“Business Transformation.

Together.” Becomes the first

company to be invited by

the National

Stock Exchange (NSE)

Satyam Maytas Fiasco

• Satyam 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 founder’s proposal to buy

• 51% stake in Maytas Infrastructure and

• 100 % in Maytas Properties.

• The total Amount for both the acquisitions was expected to be

• US$ 1.6 bn

• Consist of US$1.3 bn for the 100% Share in

Maytas Properties

Maytas Properties Ltd

• One of the reasons for the complete failure of Maytas properties is the ongoing economic slowdown and real estate market slop

•US$ 0.3 bn for the 51% Share in

Maytas Infra

Maytas Infra

• The company is started in 1980 now run by the sons of RamalingaRaju

• The main reason for the complete failure of Maytas Infra is due to the disaster of Satyam

Satyam’s justification forMaytas buyout deal

• the integrated organization would be stronger , and more diversified to deal with the uncertainty of the market.

• This is the move goes to the real 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

WHY HE FAILED…????

• Company announced Acquisition of 51% stake in Maytas Infra and 100% stake in Maytas Properties on 16th Dec 2008 but The deal was not profitable for investors

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

• He tried to fill the gap b/w actual profits of the company and the profits that were shown in records, balance sheets etc.

• The deal was not profitable for investors.

• investors put down carelessly Satyam's stock

Confession!!!

• he confessed

(on Jan 7, 2009),

the frauds made by him for showing inflated profits in the balance sheet

• According to the ‘confessional’ statement of Mr. Raju, the balance sheet manipulation was more than Rs.7000 crore

NDTV report

WHATWENT

WRONG?

Simple manipulation of revenues and earnings To

show superior performance

Raising fictitious

bills for services

that were never

rendered.

Operating profits were artificially boosted from

the actual

Rs 61 crore to

Rs 649 crore.

Actual Op Reported Difference0

100

200

300

400

500

600

700

61

649588

Operating Profit

Auditors missing in…

• do bank reconciliation to check whether the money has indeed come or not.

• check bank statements and certificates.

•So was this a total lapse in Supervision or were in the bank statements ,no one knows is it fraud

ACTIONSTAKEN

The SEBI

• The SEBI had in December given a clean official note to Satyam in an investigation on violation of corporate governance law.

What Managementcould do??

• Change the name of the company

• Reconstitution of the board • Try building confidence in

the clients to get back the lost projects.

• It could also be merged with any other software company.

L&T deals

Tech Mahindra’s deal….

• Tech Mahindra is paying Rs1757 crore

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

THANK YOU…..