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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
8/8/2019 Satyam Scam Mineee
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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.
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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.
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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
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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..?
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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.
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Confession January 7th , 2009
The following statement he made in his confession letter
Every attempt to eliminate the (balance sheet) gap failed.
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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
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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
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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
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Who is guilty in this sordid state
of events?
But there were others who are
also culprits.
SATYAM SCAM: SO WHOM IS TO
BLAME`
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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.
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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.
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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.
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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
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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
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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..???
8/8/2019 Satyam Scam Mineee
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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.