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Satyam Fiasco


IT major Satyam Computers, after being in the news for all the bad reasons has reported a major scam which left the country shocked.

The major developments:
Satyam Chairman B Ramalinga Raju resigns as Chairman and issues a letter stating that he has been involved in major misrepresentations of accounts.

The balance sheet carries as of September 30, 2008 a) Inflated (non-existent) cash and bank balance of Rs 5,040 crore (as against Rs 5361 crore reflected in the books) b) An accured interest of Rs 376 crore which is non-existent c) An understated liability of Rs 1,230 crore on account of funds arranged by Raju d) An over stated debtor position of Rs 490 crore (as against Rs 2651 reflected in the books.

For 2Q 08, “reported revenue of Rs 2,700 crore and an operating margin of Rs 649 crore (24 per cent of revenues) as against the actual revenues of Rs 2,112 crore and an actual operating margin of Rs 61 crore (3 per cent of revenue)”.

“In the last two years a net amount of Rs 1,230 crore was arranged to Satyam (not reflected in the books of Satyam) to keep the operations going by resorting to pledging all the promoter shares and raising funds from know sources by giving all kinds of assurances”

Under section 628 of the Companies Act, which deals with misrepresentation of accounts, he could be punished for a maximum of 2 years along with penalty. However, the punishment term could be extended to seven years for producing false affidavits and other documents.

full copy of the letter


NSE removed Satyam from Nifty (and other indices like CNX 100, S&P CNX 500,CNX IT) and replaced it by Reliance Capital effective January 12.

Ram Mynampati is the interim CEO of the company and has formed a new team. Ram Mynampati joined Satyam as executive vice president in 1999 and became executive vice president and chief operating officer in November 2000.

By the end of the day, the company had eroded more than Rs 10,000 crore of market capitalisation with the share price falling from Rs 179 (open) to Rs 40 (close), a fall of over 77% in one day.
Since the shares are also traded on futures and options, the trading of the stock also could not be stopped during the day in spite of the sharp fall.

Watch out for more on this issue.


Complete story from Rediff

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