Satyam Saga
Satyam  First IT Company in the World
• Set up in the year 1987 to provide
services in IT sector
• India’s 4th biggest software company in
India
• It is listed in BSE, NSE, NYSE and Euro
next (Amsterdam).
• BSE IPO oversubscribed 17 times when
made public in 1991
• The company employs 53,000 IT
professionals across development
centers in 6 continents
Certified under ISO9001:2000
 Ranked Among India’s 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
 Chairman and founder Satyam
Computers Services Limited

 Winner of Ernst & Young entrepreneur

of the year award in 2007
B. Ramalinga Raju
Founder & Chairman, Satyam Computers
Ltd.

 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. Rama Raju
Promoter & CEO, Satyam Computers Ltd.
Satyam Decade at a Glance
 Fabricated Income Statements

• Details of cash balances with Scheduled banks are not there in the
Annual report

• Question raised by Equity analyst Kawaljeet Saluja -$500 mn cash

parked in current account
5,040 + 376 + Rs. 1,230 Cr
Rs. 7,136
470 (Rs. Cr)
Cr
Understated Liabilities
Fraud Amount
Overstated cash
balances, Income
receivables
Slippery Slope to Disaster

December’08 brought news of pending litigation by a former client, online mobile-

payments service Upaid Systems which filed a case of intellectual fraud and forgery
against Satyam in 2007

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 five-year contract

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
 Satyam
Dec-2008 to Jan-2009
 Causes of the problem
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

– The other lacuna in the modern financial world is lack of human touch.

– More focus on short term gains

Analysis of the Causes of 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 the
company.
 Analysis of the Causes of the Problem
o 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 while tweaking numbers to
keep share price high.

– Take Over code: Probable violation if he knew when his stake fell
below 5%
 Analysis of the Causes of the Problem
• Satyam had incurred the loan of Rs 1230 crores from various
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
However, the deal was called off.
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 shareholders
experienced an objective conflict of interest.
In the News..
 Marketing
Aspect
Of
Satyam Saga
 Satyam Clients
A total of 650+ Clients
185 of the top fortune 500 Companies
 Satyam, which specializes in business software and offers back-office
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 MNC’s such
as IBM, HP and Accenture.
 GE, the largest client for Satyam, was
learnt to be evaluating options of
inducting the Satyam team working
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. 
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 multi-million
dollar contract.
Clients were looking out – and so were the
employees

And companies were fine with clients

approaching them, but had a moral issue if
employees approached them? 

How fair is that?

H.R Aspect
of
Satyam
Saga
• It was nights and heartburns for the over 53,000 employees of Satyam
Employees
Computers as they conjured up worst case scenarios
like non-payment of salaries, project cancellations , layoffs and
equally bleak prospects outside.

• As the company's management tried to reassure shocked employees,

jobs sites had got flooded with resumes of hundreds of Satyam
employees.

• Job consultants believed that in the current economic climate , Satyam

employees might have to settle for lower salaries outside.

It was an Employers' Market

 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 won’t take you’ slogans, these
employees were available for cheap.
 ? ?? ?
n es s
f a ir
s t h e
e re i
W h
 This is where one has to respect a company like Wipro
which 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 – that’s what grows an industry, especially in
these times when one is looking forward to mature action from the
industry.
 Each company said to itself.

We applaud government for taking quick

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.
After the Scam
 New CEO and
AFTER THEspecial
SCAM…advisors

- On 5 February 2009, the six-member 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 two-day-long board meeting also appointed Homi Khusrokhan (formerly

with Tata Chemicals) and Partho Datta, a Chartered Accountant as special
advisors
 Acquisition by Mahindra
Group

• On 13th April 2009, via a formal public

auction process, a 46% stake in Satyam
was purchased by Mahindra & Mahindra
owned company Tech Mahindra, as part
of its diversification strategy.

• Effective July 2009, Satyam rebranded its

services under the new Mahindra
management as "Mahindra Satyam" with
a new corporate website
www.MahindraSatyam.com.

• C.P Gurnani is the current CEO.

 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.