Satyam Fiasco

SATYAM
Set up in the year 1987 to provide services in IT sector Indias 4th biggest software company in India It is listed in BSE, NSE, NYSE and Euronext (Amsterdam). BSE IPO oversubscribed 17 times when made public in 1991 The company employs 53,000 IT professionals across development centers in 6 continents

> Chairman and founder Satyam Computers Services Limited > MBA from Ohio University > IT man of the year award by Data Quest in 2002 > Winner of Ernst & Young entrepreneur of the year award in 2007
B. Ramalinga Raju Founder & Chairman, Satyam Computers Ltd.

B. Rama Raju Promoter & CEO, Satyam Computers Ltd.

> He became the Managing Director and Chief Executive Officer in 1991 > Mr. Rama Raju holds a Master of Economics degree from Loyola College, Chennai and a MBA degree from Loredo State University, Texas > Before 1997, he was with Maytas Infra Limited as one of its Directors

Satyam Clients
A total of 650+ Clients 185 of the top fortune 500 Companies

Satyam Share holding Pattern

Institutional & NonInstitutional Shareholders
LIC L&T Lazard Aberdeen Fidelity ICICI Prudential Citigroup JP Morgan 4.34% 4% 13.16%

Total Market capitalization of Rs. 15,262 Cr (As on Dec 16, 2008 )

Satyam Decade at a Glance

Maytas Infrastructure
The Rajus hold 36.64 per cent while institutional holding is 10.92 per cent The company had raised Rs 327.45 crore through IPO. It had a turnover of Rs 1,660 crore and net profit of Rs 100 crore in the last financial year Satyam planned to acquire 51 per cent stake for Rs 1, 440 crore or $0.3 billion
Mr. Teja Raju(VC)

Maytas Properties
B. Rama Raju Jr. (VC)

Rajus family owns 35% of Maytas properties Founded in 2005, it has a land bank of 6,800 acres It has clearances for three IT SEZs based on 148 acres An undisclosed stake is held by Infinite India Investment Management, a realty fund jointly promoted by JM Financial and US-based SRM Investments, which invested Rs 600 crore in February

So, How did it all began?

16 Dec 2008

17 Dec 2008

26 Jan 2009

Satyam gets board approval for controlling stake in Maytas Infrastructure and Maytas properties as fully owned subsidiary for $1.6B (Rs. 8000 Cr.)

Satyam backs out of Maytas deal citing investors protest

Major Clients of Satyam express dissatisfaction. Contracts worth $200 million up for grabs
Satyam shares plunge 55 percent in NYSE. BSE share plunges over 30%

Board meeting to be held on Dec 29 for proposed buyback of shares

19 Dec

20 23 Dec Dec

206Jan 2009

British mobile solution provider Upaid files a law suit against Satyam in a district Court in the US over Maytas deal. May face $1 Billion in penalties Centre refers Satyam deal to Registrar of Companies (RoC)

World Bank bans Satyam for 8 years due to inappropriate payments to staff and inability to provide information sought on invoices

26 28 29 Dec Dec Dec

26 Jan 2009

3 more Independent Directors resign. Mendu Rammohan Rao, Krishna G Palepu and Vinod K Dham

1st independent director Dr. Mangalam Srinivasan resigns from Satyam board

Board announces exploring option for buyback of shares to restore investor confidence

Satyam asks DSP to review board structure

Rumors in market about strategic takeover by IBM, Accenture

Promoters disclose that their entire holding in Satyam pledged with institutional lenders since 2006

IL&FS sells 44.1 lakh shares pledged shares of Satyam promoters in 1 day. Promoters equity reduced from 8.6% to aprrox 7%

30 02 03 Dec Jan Jan

26 Jan 2009

Post cancellation of deal, Maytas looks for raising $500 million through sale of equities and properties

IL&FS sells further 44.27 Lakh pledged shares taking the tally to 1.5 crore pledged shares Satyam-Upaid case hearing over the Maytas deal in Texas court on January 8.

Satyam board confirms promoters stake to be around 5%. Further 3.2% still pledged.

05 06 Jan Jan

26 Jan 2009

Promoters stake in the company down to 4.5% SEBI considers proposal to make it mandatory for promoters and majority share holders to disclosed pledged shares to stock exchange

Total pledged shares sold by IL&FS reaches 2.5 Cr. in last 13 days. Promoters stake down to 3.6%. Still a further 1.7% are pledged

Tech Mahindra (Revenues 3766 Cr.) offers to merge with Satyam (Revenues 8473 Cr.)

The Night Before 7th Jan Merill Lynch discovers serious irregularities in books of accounts and approaches regulator SEBI for further course of action and its inability to investigate further. DSP submits report to SEBI and Satyam management late night.

07 Jan

26 Jan 2009

09:45 A.M. Satyam Chairman Ramalinga Raju writes the following letter to the company board

ADRs crash 90% Satyam BSE scrip falls 78% DSP snaps ties with satyam. Ram Mynampati takes over as interim CEO according to Rajus letter

Hunt for Raju brothers begin. Amid speculation over his whereabouts, Raju is believed to have left for the United States in connection with a court case. Satyam stripped of Golden Peacock award

Auditing firm PWC under scanner Govt. instructs RoC to review report

NSE removes Satyam from its benchmark index Nifty. It will be replaced by Reliance Capital with effect from January 12. It will also be removed from various other indices like CNX 100, S&P CNX 500,CNX IT and the CNX Services sector index

08 09 Jan Jan

10 Jan

26 Jan 2009

PwC in major trouble. Stocks of PwC clients take a major beating at the BSE and NSE CFO Valdamani Srinivas, who is the financial custodian of the company resigns

BSE to replace Satyam Computer with Sun Pharmaceutical in its benchmark index Sensex with effect from January 12.

Former CFO Valdamani Srinivas remanded to judicial custody Raju brothers arrested by the police on charges of criminal conspiracy, cheating, forgery, misappropriation of funds and criminal breach of trust.

PwC shot back at Satyam, saying in a media statement that the auditing was based on the audit evidence provided by Satyam and in was accordance with applicable standards.

Market Capitalization of satyam falls to Rs. 1,607 Cr from Rs.15,262 Cr. on Dec 16 in 19 trading sessions.

13 14 Jan Jan

16 Jan

26 Jan 2009

Government hands satyam case to SFIO

Maytas stocks hit the lower circuit for 7th consecutive trading session

The newly appointed 3 member board appoints auditing firm KPMG and Delloitte to assist it in cleaning the mess in the scam tainted companys accounts

The government expanded the threemember Satyam board to six to include S Balakrishnan of Life Insurance Corporation, Tarun Das, chief mentor of the Confederation of Indian Industry and T N Manoharan, former president of the Institute of Chartered Accountants of India

Why on 7th Jan 2009?

DSP Merrill Lynch informed SEBI about Material irregularities in Accounts on 6th Jan Minutes of Meeting of 16th December,2008 were not submitted to RoC-(This created some doubts) Hearing of Upaid- satyam case on 8th Jan at the US court

Raju ban gaya conmanHow?

Proposing High risk Maytas acquisition Overvaluing the proposed acquisition Promoter pledging their holdings
holding) (decrease in

Refusing to resign

Fudging Income statement

Fabricated Income Statements

Creative Account Practice

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 + 470 (Rs. Cr)

Rs. 1,230 Cr

Rs. 7,136 Cr
Fraud Amount

Understated Liabilities Overstated cash balances, Income receivables

Share Pledging
Stake decreased from 21.6% to 3.6% Money raised through 4 Front run Co. by offloading pledged shares.
Amount (In Rs. Cr)
Harangi Agro

Narayandri Greenfields
Amravati Greenlands Amount (In Rs. Cr)

Bangar Agro
0 50 100 150 200

Fake FD receipts and Employee Nos.??

Take FD receipt
The money has already vanished Tell to Banks FD receipt is Lost

At the end show the original FD receipts Park the Money in other Bank

Repeat the procedure

Ask for Duplicate Receipts

Use the Duplicate to Withdraw money

Satyam-Maytas Nexus Contd..

Cash raised & siphoned off funds used to buy several thousands of acres of land across AP through several benami accounts Helped Maytas in getting major contracts Question raised regarding Hyderabad Metro Project being allocated to Maytas Infra.

The Inside News

Satyam's CFO Srinivas Wadlamani has sold around 8,00,000 shares & even Satyam's interim CEO, Maynampati has sold 4,00,000 shares in past 6 months above Rs 300 per share. Satyams top 40 officials collectively sold shares worth more than Rs 300 crores in the past 6 months

STOCK CHARTING

What Happened Then.

CA ministry dissolved the Satyam Board and announced new members. 3 more members-chief mentor of CII Tarun Das, ex-president of ICAI T N Manoharan and S Balkrishna Mainak of LIC

Deepak Parekh Former HDFC Chairmam

Kiran Karnik Former NASSCOM Chairmam C Achutan Former SEBI Member

 Tech Mahindra the IT arm of the Mahindra Group won the bid to buy 31% in Satyam for a price of Rs.58/- per share. They renamed the company Mahindra Satyam and as per the results disclosed for the quarter ending June 2011,the company is back on the growth track.

CREDITS
1) Akash Mehta 33 2) Vidur Suri 55 3) Anurag Asawa 05 4) Rohit Asarpota 04 5) Amit Ahuja 02 6) Hiten Balani 07

Thankyou