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    Satyam Presentation - Final

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    Azhar
    The document discusses the Satyam scandal, one of India's largest corporate frauds. It provides background on Satyam, a leading IT services company. It then describes how the company's founder, Ramalinga Raju, confessed in January 2009 that Satyam's accounts had been falsified for years, inflating cash and bank balances and understating liabilities. Raju admitted to a fraud of Rs. 7,800 crores ($1.5B). The scandal severely damaged investors, employees, and India's reputation as an investment destination. Auditors were criticized for failing to detect the fraud earlier despite red flags. The document examines how the fraud occurred and the impact on various victims.

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    Satyam Presentation - Final

    Uploaded by

    Azhar
    49 views23 pages
    The document discusses the Satyam scandal, one of India's largest corporate frauds. It provides background on Satyam, a leading IT services company. It then describes how the company's founder, Ramalinga Raju, confessed in January 2009 that Satyam's accounts had been falsified for years, inflating cash and bank balances and understating liabilities. Raju admitted to a fraud of Rs. 7,800 crores ($1.5B). The scandal severely damaged investors, employees, and India's reputation as an investment destination. Auditors were criticized for failing to detect the fraud earlier despite red flags. The document examines how the fraud occurred and the impact on various victims.

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    Satyam Presentation- Final

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    The document discusses the Satyam scandal, one of India's largest corporate frauds. It provides background on Satyam, a leading IT services company. It then describes how the company's founder, Ramalinga Raju, confessed in January 2009 that Satyam's accounts had been falsified for years, inflating cash and bank balances and understating liabilities. Raju admitted to a fraud of Rs. 7,800 crores ($1.5B). The scandal severely damaged investors, employees, and India's reputation as an investment destination. Auditors were criticized for failing to detect the fraud earlier despite red flags. The document examines how the fraud occurred and the impact on various victims.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    49 views23 pages

    Satyam Presentation - Final

    Uploaded by

    Azhar
    The document discusses the Satyam scandal, one of India's largest corporate frauds. It provides background on Satyam, a leading IT services company. It then describes how the company's founder, Ramalinga Raju, confessed in January 2009 that Satyam's accounts had been falsified for years, inflating cash and bank balances and understating liabilities. Raju admitted to a fraud of Rs. 7,800 crores ($1.5B). The scandal severely damaged investors, employees, and India's reputation as an investment destination. Auditors were criticized for failing to detect the fraud earlier despite red flags. The document examines how the fraud occurred and the impact on various victims.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    of 23

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

    SANJINI JOSHI

    CHANGU KANA THAKUR INSTITUTE OF MANAGEMENT STUDIES & RESEARCH, NEW PANVEL.
    1

    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.
    2

    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
    8

    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.".
    9

    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.

    10

    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


    12

    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
    13

    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..
    15

    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.

    16

    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

    17

    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

    18

    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.
    19

    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.
    20

    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

    21

    Conclusion!
    22

    Thank You.
    23

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