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Satyam Saga
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Satyam Set up in the year 1987 to
provide services in IT sector
Indias 4th biggest softwarecompany in India
It is listed in BSE, NSE, NYSEand Euro next (Amsterdam).
BSE IPO oversubscribed 17times when made public in1991
The company employs 53,000IT professionals acrossdevelopment centers in 6
First IT Company in the World
Certified under ISO9001:2000
Ranked Among Indias Top 10
Best Employers, 2004 and 2003
Top 13 Best-Managed Companies
in India
Winner, Corporate Citizen I
award for Corporate Social
Responsibility
SAP Pinnacle Award 2008
Satyam Won golden peacock
award for excellence in Corporate
Governance on Global level for 2nd
time United Kingdom Trade and
Investment India Business Award for
Corporate Social Responsibility
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Chairman and founder Satyam
Computers Services Limited
Winner of Ernst & Young entrepreneur
of the year award in 2007
He became the Managing Director
and Chief Executive Officer in 1991
Before 1997, he was with Maytas Infra
Limited as one of its Directors
B. Ramalinga Raju
Founder & Chairman, SatyamComputers Ltd.
B. Rama Raju
Promoter & CEO, Satyam
Computers Ltd.
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Satyam Decade at a Glance
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Fabricated Income Statements
Details of cash balances with Scheduled banks are notthere in the Annual report
Question raised by Equity analyst Kawaljeet Saluja
$500 mn cash parked in current account
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5,040 + 376 +470 (Rs. Cr)
Rs. 1,230 Cr Rs. 7,136Cr
Overstated cash
balances, Incomereceivables
Understated
Liabilities Fraud Amount
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World Bank banned Satyam from doing any of its work after it
found Satyam employees had hacked into its system and gained
access to sensitive information
It also did not renew their fiveyear contract
Slippery Slope to Disaster
December08 brought news of pending litigation by a former client,
online mobilepayments service Upaid Systems which filed a case of
intellectual fraud and forgery against Satyam in 2007
On Dec. 16, when Raju announced the company would spend $1.3 billion
to buy Maytas only to reverse the decision a few hours later under
shareholder pressure
Satyam ADRs lost 50% of their value overnight
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SatyamDec-2008 to Jan-2009
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Problems created
Negligence of fiduciary duties, maintenance of ethical
standards and
CSR in attempt of covering up for accounting gap created by
cooking up financial books over the years
Causes of the problem
Power of greed overshadowed the responsibility to meet
fiduciary duties.
Low ethical and moral standing of the top management.
External factors are fierce competition and the need to
impress the investor,
analyst, shareholder, and stock market
Causesof the problem
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Analysisof the Causesof the Problem
o Greed for money is not the only greed:
Greed for power, competition, success, prestige (as Mr Raju did
in many accolades and awards) may compelled the highly
educated man to work unethically which resulted in violation of
fiduciary duties by the executive and independent directors of thecompany.
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Analysis of the Causes of the Problemo Low ethical and moral standards as they involved
in following :
Fudging Numbers: Pumped up revenue, profit, bank
deposits, and cash reserve numbers.
Undisclosed pledges: Procured a loan of Rs.1230 crores
without disclosure
Insider trading: Sold most of his 26% stake whiletweaking numbers to keep share price high.
Take Over code: Probable violation if he knew when his
stake fell below 5%
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Analysis of the Causes of the Problem Satyam had incurred the loan of Rs 1230 crores fromvarious sources so they were under a pressure to show
rosy picture of a company otherwise creditors would
have been skeptical.
Satyam did focus on the short term gains rather than
long term strategies to flourish the company thereby
engaging in cooking up the accounting books
And then without consideration of shareholders in
order to rectify the gap made an attempt to buy
share in sister concern Maytas for $1.3 billion which
was although granted by board but shareholdersexperienced an objective conflict of interest.
However, the deal was called off.
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In the News..
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Marketing AspectOf
Satyam Saga
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Satyam Clients
A total of 650+ Clients185 of the top fortune 500
Companies
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Satyam, which specializes in business software and offers
backoffice outsourcing and consulting, had very high profile
clients & counts
General Electric, Nestle, Qantas and Fujitsu among its major
customers.
But with skeletons coming out of the closet, during the scam
customers were unlikely to renew contracts when they came
up for review, analysts said.
As a result of the SCAM
Satyam was foreseen losing some of its clients to
MNCs such as IBM, HP and Accenture.
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Nestle, the world's largest
food company, has been a
Satyam client since 2004.
In 2007, it extended its
engagement with the
Indian IT firm for another
three years, landing it a
new multimillion dollar
contract.
GE, the largest client for
Satyam, was learnt to be
evaluating options of
inducting the Satyam teamworking on its IT project & a
source familiar with the
matter said talks are on with
other outsourcing vendors.
Satyam's bigger rival Tata
Consultancy Services (TCS)
was considered & also provided
services to GE.
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Clients were looking out and so were
the employees
And companies were fine with clientsapproaching them, but had a moral issue
if employees approached them?
How fair is that?
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H.R Aspect
ofSatyam Saga
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Employees It was nights and heartburns for the over 53,000employees of Satyam Computers as they conjured upworst case scenarioslike nonpayment of salaries, project cancellations ,layoffs and equally bleak prospects outside.
As the company's management tried to reassureshocked employees, jobs sites had got flooded withresumes of hundreds of Satyam employees.
Job consultants believed that in the current economicclimate , Satyam employees might have to settle forlower salaries outside.
It was an Employers' Market
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The question here is ????????
Everybody wants Satyam clients, but not
employees?
Well, if you take the head out, tail will follow
if Satyam clients move away, employees will
( have to) quit and thanks to all these we
wont take you slogans, these employees were
available for cheap.
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This is where one has to respect a company like
Wiprowhich made it clear that they will treat Satyam
employees as any other candidate and will evaluate
them on same scale i.e. be fair to clients as well as
employees.
And Wipro stated,
Respect Talent thats what grows an industry,
especially in these times when one is looking forward
to mature action from the industry.
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Each company said to itself.
We applaud government for takingquick action in setting up the board
(and restoring confidence on Indian IT
industry) now it was time to ask
Satyam competitors to go easy on
their mouth.
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AFTER THE SCAMNew CEO and special advisors
- On 5 February 2009, the sixmember board appointed by the
Government of India named A. S. Murthy as the new CEO of
the firm with immediate effect.
Murthy, an electrical engineer, has been with Satyam since
January 1994 and was heading the Global Delivery Section
before being appointed as CEO of the company.
The twodaylong board meeting also appointed Homi
Khusrokhan (formerly with Tata Chemicals) and Partho
Datta, a Chartered Accountant as special advisors
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Acquisition by Mahindra
Group
On 13th April 2009, via a formalpublic auction process, a 46% stake inSatyam was purchased by Mahindra
& Mahindra owned company TechMahindra, as part of itsdiversification strategy.
Effective July 2009, Satyamrebranded its services under the new
Mahindra management as "MahindraSatyam" with a new corporate
website www.MahindraSatyam.com.
C.P Gurnani is the current CEO.
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Restatement of Results
As a result of the scandal, under the directions of the new
Mahindra management team, Satyam Computer Services
restated its financial results for the period 2002 to 2008.
These restated results were published in September 2009.
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