Fresh look at a corporate scandal in India

Published on Dec 09, 2012

By Lai Kwok Kin In January 2009, I was rushed from Singapore to the south Indian city of Hyderabad for an unlikely crisis management assignment. A costly PR blunder by Indian IT major Satyam Computers was exceeded within days by the spectacular confession of major fraud by its enigmatic founder B. Ramalinga Raju, a soft-spoken business leader well known to many Singapore government and industry leaders. The company, listed on the Indian and New York stock exchanges, had made its name implementing IT infrastructure for governments and industries. At the end of 2008 it first announced and then abruptly reversed a decision to acquire the property and infrastructure business controlled by Mr Raju and his family. Punished for deviating from its core IT focus, the company's stock priced plunged even as I arrived at the historic capital of Andhra Pradesh, famous for its once-opulent nizams under British rule, the remarkable Salarjung Museum and splendid Hyderabadi beriani. As the crisis communications team swung into action, shareholders - and corporate India - were subjected to a second, even greater horror when Mr Raju, apparently without any consultation with his senior management, issued a seven- page public letter confessing how he inflated the firm's cash position by more than US$1 billion, incurred liabilities and overstated revenues and margins. His letter, admitting to what emerged as the biggest corporate scandal in India, threatened the country's global reputation for IT services and led to the exodus of about 10,000 employees at the company he founded. Fraud of such proportions - by a quiet man regarded not only as a business visionary but also as a somewhat saintly philanthropist - makes good newspaper copy. While thousands of media articles and at least a few books have been written about the saga, most have focused on the fraud, its early chronology and the immediate aftermath, including the acquisition by the successful white knight - the Indian conglomerate Mahindra and Mahindra. Now, a new tell-all book published by Random House fills many of the gaps in earlier accounts, including the hopes and fears of Satyam's demoralised staff, how its new leaders rebuilt the company, restored its reputation and the final preparations for a multi-billion US dollar merger between the since-renamed Mahindra Satyam Computers and another listed IT company, Tech Mahindra.

Written by Singapore-based technology writer Zafar Anjum, The Resurgence Of Satyam is an insightful and useful read for IT executives and business leaders involved in some way or another with the rise of India as a major software servicing centre. Mr Zafar uses a "screenplay" writing technique to weave in flashbacks - interviews and blog-posts by Satyam leaders such as the global chief executive C. P. Gurnani and the new Singapore-based AsiaPacific head Rohit Gandhi as well as employees who stayed or left, some speaking on condition of anonymity about their disappointments, hopes and fears. These insights have lifted the book beyond the more traditional quick-fix exposes after a major corporate crisis. Mr Zafar has used the intervening three years to garner frank admissions by its new leaders of errors made and lessons learnt in rebuilding the company and preparing for a major corporate merger at the same time. For business leaders the book serves as a useful guide on the importance of corporate governance, no matter how saintly or charismatic its major shareholder may be; the challenges of salvaging a listed company on the brink of corporate death with thousands of jobs at stake; the difficult decisions that must be made and how value can be extracted by decisive action and calculated risks. In the last three years, the company's revenues have grown strongly and its global headcount now exceeds 53,000. The merged entity will rank among the top five Indian IT majors and targets to double its combined revenue annually to US$5.0 billion by 2015. If Mr C. P. Gurnani and his team pull it off, it would be arguably the most dramatic corporate turnaround in corporate India in recent times. It is a bold target which will involve not just hard work, clear strategy and strong leadership but also an adherence to good old values of honesty and accountability. For Satyam, after all, means truth in Sanskrit. The writer is a Singaporean who has lived and worked in India as a journalist. He is the founder of WeR1 Consultants, a public relations and investor relations consultancy.