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This Wednesday will be rember as darkest day in Indian Corporate. The Satyam saga drew a surprise and dropped a bombshell when he send a 5 page confession letter to exchanges along with the resignation of the company chairman and founder Ramalinga Raju. The fraud is to be extent of Rs 7000 crores and it is saying that it is one of the biggest fraud of India. The confession has shaken the investor confidence and market sentiments that led the company share plunge by over 77% on trade. On the biggest ever IT fraud of India , Satyam Computers had shown their Q2 FY09 operating profit at Rs 649 crore as against the actual Rs 61 crore. This has resulted in artificial cash and bank balances going up by Rs 588 crore in the second quarter alone. Account manipulation started several years ago.
The result: the Satyam stock lost 75% of its market cap, a huge collateral damage took place across the market that tanked 750 points raising a lot of apprehensions about how the world would see it both for the IT services sector, the Indian corporate sector and its standards of governance and also to how FIIs would react to such an episode.
In a letter to the board of directors, Raju states that Satyam’s balance sheet as on Sep 30, 2008, carries an inflated (non-existent) cash and bank balances of Rs 5,040 crore as against Rs 5,361 reflected in the books. In addition to this Mr. Raju also stated that the cash position of the company was inflated by Rs 321 crore. Accrued interest of Rs 376 crore which was non existent and the debtors position was overstated by Rs 490 crore.
Satyam had nothing by way of a balance sheet and it had been cooking its books for the last many quarters, fabricating lies for the benefit of all its shareholders, for its independent directors and other directors and perpetrating a lie that went through for several years before he chose to confess this morning.
The Chief said they mislead the board by giving wrong figure, now thats raise another question to the auditors of the company. PWC - Price Waterhouse Coopers was auditors to the company for more than 5 years. This also raise question on the credibility of this firm. How they ignore the cash balance or fixed assest of the company. This scam make one more serious question to banks also. HDFC bank and ICICI bank were the banker of the company. Why didn't cross check the details ? There is lots of question is to be answred by Mr. Raju only when he will be available.
India's fourth largest software exporter by sales has an equity capital of Rs 134.77 crore. Face value per share is Rs 2. The current price of Rs 40.25 ( on 07/01/2009 closing rate ) discounts its Q2 September 2008 annualised EPS of Rs 35.48, by a PE multiple of 1.13 .
Meanwhile, the stake owned by founders of Satyam Computer Services has fallen to 3.6% from 5.1% after institutional lenders sold the stock. Satyam had said earlier the founders' stake might have been diluted as institutional lenders to whom they had pledged their shares exercised options to cover margin calls.
Satyam Computer Services' net profit rose 3.70% to Rs 597.43 crore on 6.87% increase in net sales to Rs 2700.52 crore in Q2 September 2008 over Q1 June 2008.
Satyam Computer Services is a global business and information technology services company. It delivers consulting, systems integration and outsourcing solutions to clients.
IL&FS Trust Company had sold 24.52 million shares in Satyam Computer Services that were pledged with it as trustee on behalf of several debenture holders and lenders. The shares had been sold since 23 December 2008, IL&FS said in a statement. The shares constitute 3.6% of Satyam's shares on issue as at 20 October 2008.
Trouble started for the fourth largest Indian IT company Satyam when Satyam Computers announced take over of Raju's family companies Maytas Infra and Maytas Properties. The deal however got called off on heavy investor protest but downturn continued haunting the company as the World Bank withdrew all transactions with the company for 8 years. That followed the news of Raju's stake sells and high level board meetings. And finally the ice broke with the crashing confession and resignation of Mr. Raju about the fraud that left the entire Indian economy and especially the Indian IT on a shock.
Satyam Computers during trading hours on 18 December 2008 had said its board will meet on 29 December 2008 to consider buyback of shares. The announcement was aimed at soothing investor nerves after the Satyam stock slumped 30.22% on 17 December 2008. Investors had chucked the stock following the company's announcement after market hours on 16 December 2008 of a $1.6 billion deal to acquire Maytas Properties and Maytas Infrastructure, companies run by Raju's sons B Rama Raju and Teja Raju. Satyam scrapped a $1.6 billion acquisition of companies connected to its chairman after the plan angered investors. The company's total disregard for corporate governance and shareholders was shocking - Satyam had no plan to take the proposal to minority shareholders.
The World Bank said earlier Satyam had been declared ineligible for direct contracts with it for eight years 'for providing improper benefits to Bank staff and for failing to maintain documentation to support fees charged for its subcontractors'. Satyam has asked the authority to withdraw what it called 'inappropriate' statements and to issue an apology, but the World Bank in Washington has said it stood by its statement. Media reports had earlier said that data theft was one of the reasons why the World Bank had barred Satyam from doing business with it for eight years.
The World Bank, which had signed a $100-million billing per annum contract, had been an important client for Satyam. Since 2003, Satyam had been writing and maintaining all software for World Bank across all locations. This also included maintenance of software in back-end offices.
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