Submitted By: Prof. SADHANA OGALE Mr. AZHARODDIN SHAIKH Ms.

SANJINI JOSHI

CHANGU KANA THAKUR INSTITUTE OF MANAGEMENT STUDIES & RESEARCH, NEW PANVEL.
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Corporate Governance:
Corporate governance is "the system by which companies

are directed and controlled.

It involves a set of relationships between a companys

management, stakeholders.

its

board,

its

shareholders

and

other

An important theme of corporate governance is to ensure the

accountability of certain individuals in an organization through mechanisms that try to reduce or eliminate the principal-agent problem.
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The Rise of :SATYAM

Satyam Computer Services was founded in 1987 and

headquartered in Hyderabad, was a leading player in the global IT consulting, outsourcing solutions and integrated IT solutions industry.
It serves over 654 global companies, 185 of which are

Fortune 500 corporations.

Won President's Award, STAR for the year 2001. (for its

outstanding support and partnership provided to HIPC Debt Initiative Team )

Won the Vice President Al Gore's award for one of the 10

best e-Government applications for the year 2000.

The Disastrous Revelation:

7/JAN/2009
It is with deep regret, and tremendous burden that I am

carrying on my conscious, that I would like to bring the following facts to your notice:

I am now prepared to subject myself to the Laws of the land and face consequences thereof. (B Ramalinga Raju) Copies marked to : 1. Chairman SEBI 2. Stock Exchanges

(Rs. Cr)
ACTUAL REPORTED DIFFERENCE Cash and Bank Balance Accured Interest On Bank FDs Understated Liabilities Overstated Debtors Total Revenues(Q2FY09) Operating Profits 2161 2112 61 2651 2700 649 490 7136 588 588
5

321 1230

5361 None

5040 1230

Raju wrote in the confession letter

Every attempt to fill the gap failed.

It was like riding a tiger, not knowing how to get off without being eaten

How did the scam happen?

Raju and his family held below 10% of the companys equity.
Raju allegedly used accounts opened in the names of the

relatives to divert money and carry out insider trading.

Siphoning off funds from Satyam into Maytas Infra, Maytas

Properties and various 325 firms floated by Mr. Ramalinga Raju.

Diversion of Rs.1,700 Crore from an overseas bank account.

Minutes After Revelation

\
SHARES.
7.25 %

Biggest single day fall for a stock in stock market

77 %

Sensex fell by 749.05 points

Nifty fell by 192.40 points
6.18 %

All time Low: Rs 11.50 All time High: Rs. 524.50

11464 Crs

1607 Crs

Worth
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VICTIMS OF FRAUD
Employees
Employees of Satyam spent anxious moments and

sleepless nights as they faced nonpayment of salaries,

project cancellations, layoffs. They were stranded in many ways morally, financially, legally, and socially.

Shareholders

Shareholders lost their valuable investments and there

was doubt about revival of India as a

preferred investment destination. Resulted in incalculable and unjustifiable damage to Brand India and Brand IT in particular.".
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VICTIMS OF FRAUD
Bankers

Concerned about recovery of financial and

nonfinancial exposure and recalled facilities.

Indian Government

orried about its image of the Nation & IT Sector affecting faith to invest or to do business in the county.

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11

 CFO revealed during investigation:

Started 6-7 years ago. 10 Crs was inflated to 200 Crs in Balance Sheet. This marginal gap went on expanding over years.

7800 CRS FRAUD

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Pressure to Meet Expectation

Growing Competition Threats of being Overtaken

Overconfidence

On his Ability

Personal Benefits

Siphoning off funds Salary of non-existent 13000 employees

Since about 7 yrs we wanted to show more income in the accounts to avoid others from involving in the company affairs and any possible hostile acquisition
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14

The application of variability in the accounting principles, practices and procedures to modify the books of accounts so that the organization objective is served. Also known as aggressive accounting ,its the operation on financial numbers, usually within the orbit of the law and accounting standards but not providing a true and fair value..
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1 + 1 = 11 , at Satyam
Income Recognition Satyam adjusted profits from one year to another year resulting into inflated profits.

Overstatement of assets They constantly increased their WIP from March 2004.
Creating Fictitious assets/revenues Fake fixed deposits of worth Rs. 3317 Crore. An accrued interest of Rs. 376 Crores which is non-existent. Created fake overseas clients and contracts which resulted in overstated revenues.

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Duties of An Auditor
Duty to make certain inquiries Duty to make a report to the company on the accounts examined by him Duty to make a statement in terms of the provisions prescribed.

3.53 Crore for the year 2008

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PARTNER

IN CRIME.

Previous record - Satyam has also been accused of frauds in 2001 and 2003. No importance was given to this. Getting third party evidence Accrued interest(fixed deposit), Debtors confirmation Factors overlooked- Changing of accounting years Huge debt despite cash surplus

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Imaginary Numbers

Rs. 3.35 Crore in 1998-99 to a massive Rs. 3320.19 Crore in 2007-08 are all fake. No distribution among share holders nor invested to earn valuable interest Operating margin: Peer companies - 20-25% Satyam - 3%

Supposed to have an independent bank confirmation of such things in the form

of a bank statement and should have obtained certificates from the banks on the tax deducted on the interest accruing on the fixed deposits.

Recession: Huge profits compared to others always a chance of creative

accounting.
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Maytas A Hole in the Ship

Started on 16.12.2008, when Ramalinga Raju

thought, buying an

infrastructure firm made sense!

It is a common affair in Indian Inc to make such pointless

investments to divide the dividends by manipulating profit margins.

Satyam intended to buy entire stakes in Maytas Properties for

$1.3 Billion and 51% stakes in Maytas Infra for another $300 Million. Raju and his immediate family members own up to 35% stakes in Maytas.
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 Satyams Maytas bid dragged media in to it.

The deal was to be financed from surplus cash. Investors and the Fund managers were shocked that the bidding process was carried without informing them.
Raju said that the deal was in complete interest of

the investors unnecessary.

and

informing

them

was

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Conclusion!
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Thank You.
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