Control System in Mahindra Satyam: focusing failure of Satyam and its rebranding

Presented by: Ajay Kumar(1052) Tausif Akhtar(1090)

Background
In 1980, Satyam spinning mill In 1987, Satyam Computer services 4th fastest growth IT company in India 9% market share 40000 employees First Indian company listed in three international exchanges i.e. NYSE, DOW and EURONEXT Listed on BSE Global Accolades and Awards (GPGAECG-2008)

Subsidaries
Maytas Properties Maytas Infrastructure Satyam BPO Nipuna Services Knowledge dynamics Nitor Global Solutions CA Satyam ASP Satyam Venture Engineering Services

Controversies
Maytas Acquisitions World Bank Upaid lawsuit Accounting scandal of 2009 Inflated staff number by 13000

Clinks in armour

Indication fraud running even at least 5 yrs back

One executive refused to take up job of CEO because he was not allowed to see BS Executive in Finance quit just after joining (2 mths) Kotak analyst inquired about $500 million in current A/c of Satyam which draws no interest Senior executive of BPO quits

Finally, The Fall

August 2008, top level officers started resigning Things gone haywire when officer like Shailesh Shah, head of strategy resigned 16th December 2008, Buyout of Maytas properties ($1.6 bn) and Maytas Infra ($1.3 bn) Negative reaction by investor and shareholders Many prospective buyers sold their share and Satyam suddenly dropped (NYSE fell 54%)

The Fall
Maytas takeover was to fill gap of cash reflected in books Many top level executives resigned by this decision Confrontation from World bank Shares fell almost 14% to its lowest in four years Raju counter World Banks

How the lies blown ???

Post-maytas fiasco, DSP Merill Lynch appointed met SEBI Officials and he found that large scale irregularities Submitted letter to SEBI Letter sent to SEBI Chairman, Board of Satyam, BSE and NSE Raju admitted an inflated cash and bank balance of 5400 crs, over stated debtor position 490 crs and fake liability of 1230 crs

Aftermath
Company Law board barred the then board of directors and nominated 10 new BOD 11th Jan 2009, new BOD appointed ICAI issued show-cause notice to PwC Merill Lynch and SFI terminated its engagement Credit Suisse suspended its coverage PwC under scanner

Aftermath Cont.
On 7th Jan 2009, NYSE halted trading of Satyam On 12th Jan, NSE removed Satyam from its S&P CNX Nifty 50-share index Founder of Satyam R. Raju arrested Satyam share fell to Rs 11.50 on Jan 10, lowest compared to highest in Rs 544 in 2008 In NYSE, from $29.10 (2008) to $1.8 (mar-2009)

Aftermath Cont

On 14th Jan 2009, PwC announced that audit report was inaccurate and unreliable On 22nd Jan 2009, CID told that actual number of employee was 40000 and not 53000 On 5th Feb 2009, GoI named A S Murthy as new CEO and Homi Khusrokham (formely with Tata chemicals) and Patho Datta (Chartered Accountant) as special advisories On 13th april 2009, Mahindra &Mahindra purchased 46 % stake in Satyam Under M & M team financial results (20022008) were restated (published in September 2009)

Impact on Indian economy

Satyam share price reduced to 78% Rs 39.95 Market cap plummeted to Rs 2,705 cr from over Rs 12,000 cr on a single day Job of over 50000 employee were at risk Damage to reputation of Indian IT sector Foreign investor will look at Indian

In March 2009 company offered bid to 2 potential buyers Tech Mahindra Larsen and Toubro Tech Mahindra offered highest bid at 58/share and pay Rs. 2850 cr for 51% stake in satyam and now company known as Mahindra satyam

Rebranding
Survey of customers and consultants 2. Reignite growth 3. Retain key talent 4. Reviewing cost structure and liabilities
1.

Services offered
Telecom, Infrastructure, Media and Entertainment &Semiconductor 2. Travel Aerospace and Defence 3. Banking, Financial Services & Insurance 4. Energy and Utilities 5. Life Sciences & Healthcare 6. Manufacturing, Chemicals & Automotive 7. Public Services & Education 8. Retail and Consumer Packaged
1.

Human Resource
Training and development :
Communication skill training 2. Product and process training 3. Behavioral, professional skill and leadership training
1.

Human Resource outsourcing

Human Resource Outsourcing (HRO) is a process in which a company partners with a service provider to support the transactional aspects of HR across the employee life cycle. Human Resource leaders can focus on strategic initiatives, cut costs, and most importantly ensure employee satisfaction

Human Resource Outsourcing

Finance and Accounting

The financial statements have been prepared in compliance with the requirements of the Companies Act, 1956 and Generally Accepted Accounting Principles (GAAP) in India Cash flows are reported using the indirect method Foreign exchange earned and outgoaccrual basis

Finance and accounting outsourcing

Finance & Accounting Outsourcing( FAO) encompasses three important functions within the Supply Chain Cycle of a product or service Order to Cash (O2C) Invoice to Pay (I2P) and Record to Report (R2R) Represent the following Processes: Accounts Payable (AP) Accounts Receivable (AR) and General Ledger Reporting (GL)

Advantage of FAO
Provide better control and build a more robust financial and accounting framework for sustained benefits. help them to deliver better quality, documentation and cost optimization to customers

Knowledge Process Outsourcing

Knowledge Process Outsourcing (KPO) is a service horizontal focused towards providing Research and Analytics services to global customers across industries. The objective of our KPO service offerings is to provide insights that can help companies make well-informed decisions based on highly customized analytical models and accurate data.

KPO cont

Market Research Consumer Behavior Segmentation Market Sizing Product Launch Market Entry Competitive Intelligence Technical Documentation

KPO Cont.

Financial Research Consumer Behavior Spend Analytics Equity Research Fixed Income Research Business Plan Performa Analysis Valuation Models Portfolio Analysis General Ledger Accounting

SWOT Analysis
Strength
Global Presence Comprehensive Service Portfolio Strategic Alliances

Weaknesses
Limited Investor Confidence Financial Performance

Opportunities
Global IT Services Industry Partnership with Pentaho Corporation BPO Services

Threats
Government Regulations Global Economic Environment Intense Competition