How the Fraud of satyam Begun ??????

Thursday, January 8, 2009

Satyam (Sanskrit for 'truth') Computer Services Ltd. was founded by B.Ramalinga Raju in 1987. The company offers information technology (IT) services spanning various sectors, and is listed on the New York Stock Exchange and Euronext.

Satyam's network covers 67 countries across six continents. The company employs 52,000 IT professionals across development centers in India, the United States, the United Kingdom, the United Arab Emirates, Canada, Hungary, Singapore, Malaysia, China, Japan, Egypt and Australia. It serves over 654 global companies, 185 of which are Fortune 500 corporations. Satyam has strategic technology and marketing alliances with over 50 companies. Apart from Hyderabad, it has development centers in India at Bangalore, Chennai, Pune, Mumbai, Nagpur, Delhi, Kolkata, Bhubaneswar, and Visakhapatnam.

According to Wikipedia , Mr.Raju stated that:
"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. It has attained unmanageable proportions as the size of company operations grew significantly (annualised revenue run rate of Rs 11,276 crore in the September quarter of 2008 and official reserves of Rs 8,392 crore). As the promoters held a small percentage of equity, the concern was that poor performance would result in a takeover, thereby exposing the gap. The aborted Maytas acquisition deal was the last attempt to fill the fictitious assets with real ones. It was like riding a tiger, not knowing how to get off without being eaten.”

In the fiscal year to March 2008, Satyam reported a 46.3 per cent rise in revenue to $2.1 billion under the US accounting standards, while net income rose 39.7 per cent to $417 million.

In October, it said revenue in this fiscal year ending in March 2009 will rise 19-21 percent to $2.55-$2.59 billion. Earlier the company said that it plans to expand its presence in Europe, Asia-Pacific and the Middle East to cut its dependence on the United States.

The news of Satyam acquiring Maytas Infrastructure for $1.6 billion (Rs 7658-crore) sent shockwaves across the country,Many questioned the things behind the deal. There was heavy pressure by share holders and lots of criticisn over governance issues,by this satyam has withdrawn the Offer with in hours of the making of the proposal.But by the time damage was done. The scrip lost over 30 per cent in India.
There was a quick change in plan after investors shown their opposition to the deals by pushing shares in India's No. 4 software services company down 55 per cent in New York Stock Exchange trade. Satyam founder and Chairman B Ramalinga Raju and other insiders hold 36 per cent in Maytas Infra and 35 per cent in Maytas Properties.
Analysts questioned the motives of Satyam's top executives, saying there was a potential conflict of interest because they hold stakes in both companies.
Also questions raised in the minds of analysists like when the market is down and companies are saving their cash to help weather the global economic slowdown , satyam goin for huge aquisision.
Ramalinga Raju originally said the deal by saying it would "de-risk" Satyam's core business in IT services.

Then immediately came a severe blow to the Hyderabad-based IT provider facing flak from investors on its decision to acquire Maytas' was World Bank banning it for 8 years.
The World Bank has banned Satyam from providing it services for eight years for alleged malpractices, including bribery.
The ban will severely impact the business prospects of the Hyderabad-based company, already battling to retain and attract fresh business in a recession-hit global market.

The World Bank debarment has been meted out for "improper benefits to bank staff" and "lack of documentation on invoices.” World Bank information security chief Robert Van Pulley admitted to the ban during a recent meeting with the officials of Government Accountability Project (GAP), a whistleblower protection organisation in the US. The bank has handed over the case to the US Justice Department and the Treasury Department.

Satyam started providing IT services to the World Bank in 2003. Two years later, allegations of bribery surfaced. In 2007, an internal World Bank investigation found that former VP Mohamed Muhsin had secured contracts and purchase orders worth $100 million for the Indian firm in return for Satyam's stock options (ADRs) at preferential prices. After which Muhsin was banned permanently from the bank. However, Satyam was allowed to work for the bank till 2008.

There have also been allegations against Satyam of causing security breaches at the bank. World Bank's records, which contain sensitive financial information, have reportedly been illegally accessed over the last year.

Now the question is , is it really a fraud or a mistake which brought them here or Wrong step taken by satyam like aquiring maytas as if it has been succeeded nobody might have known this.
Raju said
"It was like riding a tiger, not knowing when to get off without being eaten," Mr Raju said, describing how the fraud, which he claimed had begun as an effort to smooth over a minor accounting discrepancy, had "attained unmanageable proportions as the size of the company operations grew".
According to Raju this was done few years back in order to smoothen small accounting difference which means like it was done intentionally to a small extent but as the company was growing it was also growing at a rapid pace.
Now from past few years satyam haven't faced huge loss , share holders were in profit and investers were also in profit as the company was globalizing at a rapid pace.It made Indian software giant on the global market. Other companies have gained up their business looking at the pace of satyam which resulted in the development of IT.
Satyam was trying to cut down the dependencies on the US market which is good for India.There was lot of employeement given by satyam. I agree this is a FRUAD which effects investers.But please comment on this, like they have done unethical business , but what do we say for their achievements of satyam for we people.what should have been done by satyam, do they have said this issue 7 years back when they are gaining the name in the market or what else could have been done in order to save our Indian IT Giant SATYAM.

Comments :

7 comments to “How the Fraud of satyam Begun ??????”

Anonymous said...

May be new managment will form to make continue the old projects and it may reduce the most of the headcount.

The problem will be handle by AP Govement and CBI.

The Board Member will be restructure the entire organization and it will be difficult get new project.

The Goodwill and Share will towards zero....


Prashanth said...

That was good mani, but my question was do satyam should have said this issue in the initial stages and even doin this satyam has got lot of IT stuff for india in global market. if it was unknown to anyone then we would have seen satyam at a stronger position now.

Manikantan said...

This is completly pre-planed and known to the TOP-LEVEL Management and Auditors.

One Such bad thing he did that he conveyed the news during Sharemarket trading time and begining of the week.

He should need to convey these things on Friday after trade hour.This might reduce the impact towards indian economy.

You will get notice that Most of the TOP-Level people will resign from today.

Satyam company book value is 9000 Cr. Now the 7000 Cr was convinced as malfunctions on book. All the transaction was done. Now you can not track/trace immedialty for 7000Cr. It will take atleast 6 month -1 Year of time for 1st level to find where is the money??????

Satyam was the 2008 winner of the coveted Golden Peacock Award for Corporate Governance under Risk Management and Compliance Issues, which was later stripped.

If issue is conveyed initial stages to shareholder he can not do any fraud. Raj and he started tranfered most of the money to Maytas (Sons Company).

Now it is the time to all the satyam employee to look for a change(New Offer).


Mahesh Kokkula said...

Good to see your efforts to put up a make up on Satyam. I agree that it has been once of the icon for the Indian IT quite for some time.

But even when it is unintentional, a mistake is a mistake. Unless this affects the other stake holders and the committed investors, that's okay... When you know that your decision affects thousands of lives, you should be honest and generous and positive.

Concentrate on the way you ended up the story "WHAT WILL BE THE SATYAM'S FUTURE??”.

This alone tells what the CEO of Satyam has done to his own IT firm.

Now due to his mistakes / strategies, lives of all Satyamites (53,000 employees) in dark. Due to him and his fraud, now the honesty of the Indian IT firms and the capabilities, credibility is questioned now.

Our market, goodwill is lost across the world of clients. We (Indian IT) are now in a position to re-brand ourselves once again in the world market and reassure the clients with our efforts. Do you think it is an over night’s job?

The other markets like China, Malaysia and Singapore can definitely make the best of this crisis.

Even so, the scandal could impact the Indian economy and the IT sector.

FIIs are large shareholders in the publicly traded Indian software companies, which have grown wealthy on the back of outsourcing business from the US and Europe. At Infosys Technologies, the FII holding is 41%, at Satyam's smaller rival HCL Technologies it is 18% of the 33% held by non-promoters. Will they now think twice, even abandon India?

There is a strong possibility investments in India will be affected. The image of Indian companies will be severely dented and foreign investors will look at Indian companies more cautiously than before.

Some have indicated that the Satyam incident itself isn't altering their investment policy in India but that this could change if signs of widespread irregularities among Indian companies, a "systemic problem", emerged.

Investors will start looking deeper into all companies they want to invest in, and rightly so. Once they realize that things are not all that bad and that most companies are decent and managements honest, they will regain their faith.

But those new to the Indian market or considering investing there for the first time may be scared away. For anyone who is new to India and has not invested in the country before, India will become a no-no.

There are fears that the brazen fraud will also scare away outsourcing clients abroad. Clients will think twice now before outsourcing to India, say some analysts.

Companies do hundreds of verifications for the employees in the name of background verification and even when he is performing well, they move him out of the company making his life miserable...

Don’t you think something similar to this should happen to the same company owner, who would have moved many employees out in the name of background verification?

If a small low level employee gets caught in corruption, laws and the authorities and media respond like hell and would not sleep till they see that he gets punished, but why the same set of people do not concentrate on the big white elephants?

I could see your intension in the write up…if I put it in words, it should be like none were affected because of this fraud….

If this being the case, the term “FRAUD” would not have been used by Satyam CEO himself.

To understand and explain the corporate business I am not an expert, but definitely, the investors and the employees, customers are affected very badly so as the Indian Economy….

Manikantan Poonkundran said...

The Board Meeting will be held on 10th Jan 2009.

The Top Management will restructure and Past 5-7 Years records will be get audited.

Satyam have very less operating cost to operate the company for only very few months.

They are trying to collect the cont. support from client and operation by forex exchange with many country money for operation.

Now it very very bad time for Satyam Employee and Other IT Employees ....

Everything will be solved in an about 1 Year of time.

Prashanth said...

whn they asked a question that " Do satyam employee's will get the salery for this month " there was no proper reply by Ram in the press Report.

It may take one year of time but reputation of Indian IT got damaged but as per narayan murthy One satyam cannot damage the reputaion IT industry in India or trust of clients for other IT companies.

Prashanth said...

Mahesh what you said is very true

"Companies do hundreds of verifications for the employees in the name of background verification and even when he is performing well, they move him out of the company making his life miserable...

Don’t you think something similar to this should happen to the same company owner, who would have moved many employees out in the name of background verification? "

i totally agree with this....

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