In one of the darkest days in India’s corporate history, Satyam Computer Services Founder and Chairman B Ramalinga Raju today resigned after saying he falsified earnings and assets.
The startling revelation prompted a collapse in the stock of India’s fourth-largest software services company. Satyam, which means “truth” in Sanskrit, plunged a record 78% on the Bombay Stock Exchange, dragging down the Sensitive Index in a scandal described as “horrifying” by Securities and Exchange Board of India Chairman C B Bhave.
The National Stock Exchange has excluded Satyam from the Nifty 50 and S&P CNX 500 with effect from January 12. A BSE spokesman said the bourse will examine whether to remove Satyam from the Sensex, which tumbled 7.3 per cent today.
Raju’s letter to the company’s board said he tried to sell two promoter-related firms to Satyam last month, in a final attempt to plug Rs 5,500 crore of “fictitious” cash on the company’s balance sheet. Profits have been “inflated for several years,” Raju said.
Of Satyam’s reported cash and bank balances of Rs 5,361 crore on September 30, Rs 5,004 crore was non-existent, Raju said in the letter. Operating margin in the quarter ended September 30 was 3% of revenue, instead of the reported 24%, Raju said. The company’s revenue was Rs 2,100 crore, 22% less than the inflated figure of Rs 2,700 crore that had been reported.
Raju arranged Rs 1,230 crore “to keep operations going” at Satyam over the last two years by pledging the founders’ shares and raising funds from other sources, he said.
“What started as a marginal gap between actual operating profit and the one reflected in the books of accounts continued to grow over the years,” Raju said. “It was like riding a tiger, not knowing how to get off without being eaten.”
His concern was that a poor performance, combined with the fact they held a small stake in the company, would make Satyam an easy target for a takeover, exposing the inflated figures, he said.
B Rama Raju, managing director of the company, also resigned today. Both will, however, continue in the position till the current board is expanded.
Raju is the founder of the satyam and most of the high ranking official and board of directors are relative of Ramalingaraju.then can Satyam is treated as public company?In letral sense satyam is not a public company and in these type of companies probablity of fraud is maximum
price water house cooper should also be under scanner that how have they audited keep everything aside but how could they verified the cash of 5040cr which is in there book but not that much cash.
Raju is the creator of satyam with talented employees,who created wealth with their talent.Fear of loosing the company has made him act the way he has acted,and finally lost it, while doing so he has exposed the employees to uncertain future,left share holders in lurch, tarnished the image of indian corporate governance .Regulators and audtors played dubious role tarnishing the image of their community. More than Raju the auditors and regulators need to be hanged.
Ironically, similiar to the current Darwinian down turn in the US (which by the way, we are not near the bottom of and will result in many more companies either downsizing or not surviving at all) this will be a good test of the maturity and stability of India, Inc and actually may be prove to be a neccesary part of the development and growth process.
Surprising that the same auditor name appears in the Grand Ponzi scheme run by Bernie Madoff. Pay hefty sum to auditors as fees, bingo, you will have a compiled report (not audited !!!!) in the guise of audited B/S.
Sans Balme Satyam for this. it is for the investors to wake up and be cautious. people try to fool as there are foolish investors and regulators too.the most terrible part of the story is that, satyam was awarded the golden peacock award for best corporate governance practices. i really pity the corporate governance council for having such inappropirate judges on the Board, who have selcted such a company for the award. i doubt if the Auditors and each of the directors are not a party to it.
i believe the govt. shud luk into more companies..
and let the masses know before they loose everything..
my 3000 satyam shares have gone down to u kno.. .. ..
What happened to the high ethics of the chartered accountants of India. Why these is not case of implicting the chartered accountants.. Do you want one more enron here....god save our sanity
Satyam Story is a catastrophe: This is sorry state of affairs & would happen if people are trying to get more cheese without basic Business fundamentals in place
This man should be penalised, arrested and put behind for a long long time. Further action should be taken against the statutory auditors who have clearly failed in their duties
There you are. do we realizwe the importance of corporate governance at major listed companies?Mr Raju and all the directors including Mr Prasad(ex cab secretary) must be charged with criminal fruad and/ criminal negligence.!
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