Satyam scam

SATYAM

"SINKING SHIP OR TIP OF ICEBERG"

SCAM

Company Profile Set up – 1987 to provide

services in IT sector. India’s 4th biggest software

company. Chairman and founder – B.

Ramalinga Raju. On 26th August, 1991 it was

converted into a Public Limited Company and went for PUBLIC ISSUE in 1992.

BSE IPO oversubscribed 17 times when made public.

It is listed in BSE, NSE, NYSE and Euronext (Amsterdam).

The company employs 53,000 IT professionals across development centers in 6 continents.

It serves over 654 global companies, 185 of which are Fortune 500 corporations.

Company Profile

First IT Company in the World Certified under ISO9001:2000 Ranked Among India’s Top 10 Best Employers, 2004 and 2003 Top 13 Best-Managed Companies in India. Corporate Citizen award for Corporate Social Responsibility. SAP Pinnacle Award 2008. Satyam Wins golden peacock award for excellence in Corporate

Governance on Global level for 2nd time. United Kingdom Trade and Investment India Business Award

for Corporate Social Responsibility

ACHIEVEMENTS

Satyam Clients

A total of 650+ Clients 185 of the top fortune 500

Companies

Satyam Board Structure

Other Independent

Directors

Dr M. Srinivasan Prof. Krishna

G PalepuMr. Vinod K Dham

Prof. M Rammohan

Rao

Mr. T R Prasad Prof. V S Raju

ISB Dean/Bharat electronics

Sasken Communication/Hellsoft /Montalvo Systems and Newpath

Former CabinetSecretary /GMR Infra/ GVK Taj

GTB/Dr. Reddy’s

Laboratories

B.Ramalinga RajuPromoter & Chairman

B.Rama RajuPromoter & CEO

Ram MynampatiWhole time

Executive Director

Srinivas Vadlamani Chief Financial

Officer

Satyam – Share holding Pattern

Institutional & Non-Institutional Shareholders

LIC 4.34%L&T 4%LazardAberdeen 13.16%FidelityICICI PrudentialCitigroupJP Morgan

Total Market capitalization was Rs. 15,262 Cr

(still Dec 16, 2008 )

o Announcement to acquire 2 group firms owned by Chairman Ramalinga Raju's sons.o 51% stake in Maytas Infrastructure and 100 % in Maytas Properties.o US $ 1.3 billion - Maytas Properties and US$ 0.3 billion - Maytas Infra.o Total outflow for both the acquisitions was expected to be US$ 1.6 billion.

So, How did it all begin?

16 Dec 2008

Satyam backs out of Maytas deal citing investors protest

17 Dec 2008

Time-Line26 Jan 2009

Major Clients of Satyam express dissatisfaction.Contracts worth $200 million up for grabs

Satyam gets board approval for

controlling stake in Maytas Infrastructure

and Maytas properties as fully

owned subsidiary for $1.6B (Rs. 8000 Cr.)

Satyam shares plunge 55 percent in NYSE. BSE share plunges over 30%

Board meeting to be held on Dec 29 for proposed buyback of shares

19 Dec

23 Dec

Time-Line206Jan

2009

British mobile solution provider Upaid files a law suit

against Satyam in a district Court in the US over Maytas deal. May face $1 Billion in

penalties

20 Dec

Centre refers Satyam deal to Registrar of Companies (RoC)

World Bank bans Satyam for 8 years due to inappropriate payments to

staff and inability to provide information sought on invoices

26 Dec

28 Dec


Board announces exploring option for buyback of

shares to restore investor

confidence

1st independent director Dr. Mangalam Srinivasan

resigns from Satyam board

Board meet initially scheduled for 29th postponed to 10th

January

29 Dec

3 more Independent Directors resign. Mendu Rammohan Rao, Krishna G

Palepu and Vinod K Dham

Satyam asks DSP to review board

structure

Rumors in market about strategic

takeover by IBM, Accenture

IL&FS sells 44.1 lakh shares pledged shares of Satyam

promoters in 1 day. Promoters equity reduced from 8.6% to aprrox 7%

Satyam objects to world bank statements,

asks to apologies or

face legal action

Promoters disclose that their entire holding in Satyam

pledged with institutional lenders since 2006

30 Dec

02 Jan


Post cancellation of deal, Maytas looks for raising

$500 million through sale of

equities and properties

IL&FS sells further 44.27 Lakh

pledged shares taking the tally to 1.5 crore pledged

shares

03 Jan

Satyam board confirms promoters stake to be

around 5%. Further 3.2% still pledged.

Satyam-Upaid case hearing over the

Maytas deal in Texas court on January 8.

05 Jan

06 Jan


SEBI considers proposal to make it

mandatory for promoters and majority share

holders to disclosed pledged shares to stock exchange

Total pledged shares sold by IL&FS reaches 2.5 Cr. in last

13 days. Promoters stake down to 3.6%. Still a further

1.7% are pledgedPromoters stake in the company down

to 4.5%

Tech Mahindra (Revenues 3766 Cr.) offers to merge with

Satyam (Revenues 8473 Cr.)

The Night Before 7th Jan

Merill Lynch discovers serious irregularities in books of

accounts and approaches regulator SEBI for further

course of action and its inability to investigate further. DSP submits report to SEBI and

Satyam management late night.

07 Jan


09:45 A.M. Satyam Chairman

Ramalinga Raju wrote letter to the company

board

ADR’s crash 90%Satyam BSE scrip falls 78%

DSP snaps ties with satyam.

Auditing firm PWC under scanner

Govt. instructs RoC to review report

Ram Mynampati takes over as interim CEO

according to Raju’s letter

Hunt for Raju brothers begin. Amid speculation over his whereabouts, Raju is believed to have left for the United States

in connection with a court case.

Satyam stripped of Golden Peacock award

NSE removes Satyam from its benchmark index Nifty.

08 Jan

09Jan


Raju brothers arrested by the police on charges of criminal conspiracy,

cheating, forgery, misappropriation of funds and criminal breach of trust.

PwC in major trouble. Stocks of PwC clients take a major beating at the BSE and NSE

BSE to replace Satyam Computer with Sun

Pharmaceutical in its benchmark index

Sensex with effect from January 12.

PwC shot back at Satyam, saying in a media statement that the auditing

was based on the audit evidence provided by Satyam and in was

accordance with applicable standards.

10Jan

CFO Valdamani Srinivas, who is the financial

custodian of the company resigns

Market Capitalization of satyam falls to Rs. 1,607 Cr from Rs.15,262 Cr. on Dec 16 in 19

trading sessions.

Former CFO Valdamani Srinivas

remanded to judicial custody

13 Jan

14Jan


The newly appointed 3 member board appoints auditing firm KPMG and Delloitte to assist it in cleaning

the mess in the scam tainted company’s accounts

Government hands satyam case

to SFIO

15Jan

Maytas stocks hit the lower circuit for 7th consecutive

trading session

23 year old employee of satyam commits suicide in

Chennai

16Jan

The government expanded the three-member Satyam board to six to include S

Balakrishnan of Life Insurance Corporation, Tarun Das, chief mentor of the

Confederation of Indian Industry and T N Manoharan, former president of the

Institute of Chartered Accountants of India

STOCK CHARTING

Fabricated Income Statements

‘Creative Account Practice’

• Details of cash balances with Scheduled banks are not there in the Annual report

5,040 + 376 +

470 (Rs. Cr)

Rs. 1,230 Cr

Rs. 7,136

Cr

Overstated cash balances, Income receivables

Understated LiabilitiesFraud Amount

UNDERSTATED LIABILITY 1230 Cr.

Which was ARRANGED BY MR.RAJU

SATYAM Meaning TRUTH.

Now, Satyam :-A Rs. 7000 cr

LIE.

o Pressure to improve the company's performance.o Capture market.o Achieve billion dollar sales mark.o “It was like riding a tiger, not knowing how to get off without being eaten.”

Impact of ScamStock Market Share - Holders Indian Economy

Employees Stake - Holders

Regulators investigating Satyam include

• Chartered accountants body ICAI constituted a six-member special committee to look into the auditing of crisis-hit Satyam Computer

and will submit its auditing report on February, 11.

• The special committee will headed by ICAI Vice-President Uttam Prakash Aggarwal .

• ICAI council members –

S L Dogra, Amarjeet Chopra;

Subodh Aggarwal ;

Akshay Gupta ;&

K R Maheshwari, a banker and chartered accountant.

• Government asked the Serious Frauds Investigation Office (SFIO)-- a body set up to crack complex white collar crimes-- to probe the

financial irregularities in Satyam Computer Services and report its findings in three months.

This decision to refer Satyam to SFIO is based on the recommendation of the Registrar of Companies (RoC) in Hyderabad, who

inspected the books of Satyam which were being fudged for the past 7 years.

Raju was arrested on charges of cheating, fraud and and other criminal charges under various sections of Indian Penal Code (IPC).

The Securities and Exchange Board of India (SEBI) officials came to Hyderabad to investigate the entire scam, but they could not do so

as Raju was in the custody of CID.

The former chief executive officer (CEO) of Satyam Computers, Raju and his younger brother Rama Raju were remanded to judicial

custody by sixth additional Metropolitan magistrate for 14 days (ie till January 23) and both were shifted to Chanchalguda Central Jail

near the city.

Action Taken By Authorities

• Liquidating assets and bringing in new investors.

• DELOITTE and KPMG has been appointed as independent auditors to help

restate the company’s financial reports.

• Government superseded the board of Satyam and decided to appoint 10

nominee-directors.

• DEEPAK PAREKH set to be appointed Chairman (Chairman of HDFC ltd and

HDFC bank), KIRAN KARNIK and CACHUTAN (legal expert).

• 3 members of BCG has been appointed as a management advisor and is

working to revive satyam.

• TARUN DASS (CII Mentor), TN MANOHARAN (former president of ICAI) and SB

MAINAK are among other 3 board members appointed by the Government.

• Satyam board has appointed GOLDMAN SACHS & AVENDUS as its Investment

Bankers.

• SEBI and government of India devise appropriate fair and transparent

measures for enabling open bids.

Why Govt. Mediated• Govt. of India was very concerned about it’s Image in

International Market especially IT , as it is also main source of foreign exchange for the country and drives economic growth of a country.

• To safeguard the Interest of small investors, So that faith can be restored in the market again.

• To take care of the employees working in Satyam. As it was never their fault for whatever happened. Their job has to be secured by the Govt. that too in economic recession time.

Steps Taken After Satyam Fraud

• Introduction of new rules by the stock market regulator, making it compulsory for promoters of companies to disclose the percentage of shares pledged by them to lenders

• Appointment of Independent Auditors and Company Secretary by Company Law Board to conduct Audit of any private organization and time.

• Set-up of 5 member Committee to suggest how to implement effective compliance and Corporate Governance in private sector by CLB.

Finally Satyam acquired by tech mahindra….

Anand Mahindra, Chairman, Tech Mahindra, the new owner of Satyam, company post the Rs 2,890-crore takeover, giving hope and future to Satyam’s 45,000-50,000 employees. A moment of truth for Satyam and a victory for the government and the regulators.

32

Raju Raju sat on the wall,Raju Raju had a great fall,

Balance sheet died,Shareholders cried,

Raju Raju made a fraud.

Raju RajuYes Baba,

Cheating usNo Baba,

Telling LiesNo Baba,

Open the balance sheet

HA! HA! HA!B. Ramalinga RajuFounder & Chairman, Satyam Computers Ltd.

Thank You !

Thank You !