Satyam computers turnaround

strategy

PROBLEMS

On 7th January, 2009

From past 7 years the accounting books were falsified

Profits were inflated caused by gaps in the balance sheet
Understated Liabilities, Overstated Debts, Accrued Interests
Raju wanted to take over his MAYTAS INFRA and MAYTAS
PROPERTIES.(company of his sons).
He was blamed that he was using the funds of the investors for the family
business.
There were allegations that funds from Satyam were diverted to Maytas,
causing the Government agencies to verify the infrastructure companys
records as well.

LOSSES

Rs 10 crore profits inflated as Rs 200 crore

This gap in the balance sheet led to a fraud of Rs 7,800 Crore

On 22 January 2009, CID told in court that the actual number of employees
is only 40,000 and not 53,000 as reported earlier and that Mr. Raju had
been allegedly withdrawing INR 20 crore rupees every month for paying
these 13,000 non-existent employees.

Turnaround Strategies

Appointing new board change in management

Board appointed by government :

former Nasscom chief Kiran Karnik,
Chairman HDFC Deepak Parikh
Former SEBI member C. Achuthan .

Satyam shares gained over 44% day after appointment of the new board.

New CEO A S Murthy

Tech Mahindra acquired Satyam on April 13,2009.

FINANCIALS

In 2008-09 losses of Rs 8,174 crore (because of provisioning of Rs 7,992

crore -- for Raju's misdemeanors)
In 2009-10 losses of Rs 124 crore
Mahindra Satyam reported a profit of Rs 120 crore (Rs 1.20 billion) in the
first six months of 2010-11.
Income for the first six months of the financial year stands at Rs 2,490
crore which could give an annual income not too different from 2009-10's
Rs 5,481 crore keeping in mind the appreciation in the rupee.

TURNAROUND STRATEGIES USED

COMPLIANCE WITH VARIOUS AUTHORITIES
In the backdrop of the accounting scandal ,important that the company
gave out true information to the authorities.
Important step to instill confidence among its shareholders.

MERGER
Synergy between the two companies i.e Tech Mahindra and Satyam
negligible.
Tech Mahindra----operational efficiency and Satyam----Bad management
They both speak the same language of business though----Employees,
clients and operating margin.
This merger was a win-win situation for both the companies.

TURNAROUND STRATEGIES USED

REBRANDING
The name Satyam had a brand value.
But the name Satyam resonates with scam----one of the
biggest corporate frauds in Indian history
Tech Mahindra ought to establish brand Mahindra Satyam
as a credible one.
CHANGE IN MANAGEMENT
Necessary for the company to restore its credibility after the acquisition
Key personnel shifted to Mahindra Satyam from Tech Mahindra
C P Gurnani appointed CEO ---------known for customer centric business
approach
Changes in management positions in CPO, CMO and others.

TURNAROUND STRATEGIES USED

ENTRY INTO UNTAPPED MARKETS
Aim to reach revenue of $5 billion by 2015.
Need to expand into new geographies like Africa, South America and
Australia
Objective was to focus on the companys bottom line.

REGAINING LOST CLIENTS

Out of the 650 clients, nearly 350 left when the scam broke out.
Government appointed directors gave assurance to the clients.
Company VC Anand Mahindra met the large customers and convinced
them to stay.
Analyst conferences held in Hyderabad, London and Boston to apprise the
customers of the companys doing

TURNAROUND STRATEGIES USED

COST CUTTING MEASURES
With the inflated income taken out, 350 customers walked out
50000 workforce considered large for Mahindra Satyam
When companies moved projects away from Satyam, they
were requested to take the teams along.
As a result Mahindra had 24000 employees on its roll then.
Manpower accounted for 55 % of companies efficient revenues.
Company exited around 32 offices saving Rs 184 crores.
Legal expenses brought down from Rs 107 crore in 2009-10 to Rs 16 crore
in the first half of 2010-11

TURNAROUND STRATEGIES USED

OVERHAUL ACCOUNTING SYSTEM AND ETHICAL
PRACTICES

The company had been using non-integrated accounting practices so that

only a few knew the full picture.
Up gradation of software services.
Employees required to understand code of conduct in business

Other turnaround strategies

employed

Integrate processes, Eliminate overlaps, leverage best practices and deliver

enhanced value to all our stakeholders.
Unified go-to-market strategy
more outcome-based, transaction-based and results-based business model.
restructuring
built on three pillars - consulting, business volume enhancement and
enterprise business solutions.
MCube initiative through which we are leveraging the presence of
Mahindras in various multifaceted sectors, which include real estate,
finance, manufacturing and distribution.

THANK
YOU