Chairman of Satyam Computer Ramalinga Raju has resigned from the company’s board. In a shocking disclosure, he has revealed some financial irregularities in the company, including an inflated cash balance of Rs 5,040 crore.
WTF it’s all about?
The beleaguered IT giant, already under scanner over the aborted acquisition of firms promoted by the Chairman's family, received a rude shock days ahead of its January 10 board meeting, with Raju stepping down along with his brother and Managing Director B Rama Raju.
Share movement as on Jan-7-09
The Satyam board on December 16 passed an unanimous resolution to let Satyam buy Maytas Infra and Maytas Properties for $1.6 billion. However the deal was called off in the wake of an outrage from the company’s shareholders as well as the institutional investors. The quick change in plans came after investors demonstrated their opposition to the deals by pushing shares in India's No. 4 software services company down 55 per cent in New York Stock Exchange trade. Satyam founder and Chairman B Ramalinga Raju and other insiders hold 36 per cent in Maytas Infra and 35 per cent in Maytas Properties.
WHO IS MR. RAJU?
Born to Byrraju Satyanarayana Raju, a farmer in Gargaparru village of West Godavari district, Ramalinga Raju attended school in Bheemavaram town and graduated in commerce from Loyola College, Vijaywada, before landing in the United States to complete his MBA from Ohio University. In 1977 Raju married Nandini, the eldest daughter of an electrical engineer based in Germany. His first business venture was Satyam Spinning and Weaving Mills Limited, set up in Shabashpally in his home district. Raju had to wind up the mill after it turned sick in a few years, but by then the idea of diversifying into other sectors had germinated in his mind. The spinning and weaving mill was followed by a construction company, Satyam Constructions. Raju also set up a software unit in his spinning mill, which became the laboratory where Raju tested his ideas for the future. It was as early as 1987 when Raju foresaw the tremendous new opportunities in then little-known world of software. Along with his brother-in-law DVS Raju, Ramalinga Raju launched Satyam Computer. However, differences over matters of management and funding led to the parting of ways with DVS Raju. Ramalinga Raju made his younger brother Ram Raju his second in command, while DVS Raju went on to launch his own company, VisualSoft, in the high technology area.
WHO ARE THE AUDITORS? -PWC
In India they audit around 118 compaines, including few big names like:
GlaxoSmith, GMR Inds, GMR Infra, Goodyear India, HCL Technologies, Jagran Prakashan, Marico, Maruti Suzuki, Mastek, Moser Baer (I), NDTV, NIIT, T.V. Today, United Breweries, and Zensar Technologies.
In the past they were named for fraudulent accounting in Global Trust Bank and DSQ Software . Despite these achievements, the alleged figure fudger was named "India Tax Firm of the Year" in 2007!
In the GTB case, Pricewaterhouse was hauled up for alleged negligence in auditing of books of the bank and failing to detect huge levels of NPAs. The NPAs had accumulated due to massive exposure made by the erstwhile bank into the stock market, which Pricewaterhouse is alleged to have overlooked. In DSQ Software, they were found guilty of manipulating share prices and falsification of accounts by Serious Fraud Investigation Office (SFIO) of the ministry of corporate affairs.
However just two days before they had suggested to get out of the mess which they could not trace for so many years.
“PwC may review its 'continuance' with Satyam Computer ( as on 5 Jan 2009)”
Now it will be interesting to see how corporates and government will rate them for this crime
Trivia: Satyam in Sanskrit means ‘truth’ and maytas is satyam in reverse, truly a reverse....
Teja Raju and Rama Raju Jr., Myatas (in)fame
From next year onwards, in all likelihood the course curriculum on corporate governance would consist this as their case study....
INTERESTING NEWS (VIEWS)
“The finance minster of India, widely believed to be Manmohan Singh, announced appointment of Ramalinga Raju, Chairman, Satyam Computer Services limited, as Director, SEBI. It is understood that Raju has been awarded for the international recognition and reputation he brought to Satyam Computer and Indian IT industry.
“Raju could create wealth where none existed. He could bring cash in access of what could have been counted. He could make Satyam earn interests on NPAs, and he could write off huge liabilities. Such an acumen and ability is not to be found easily in men, and India could benefit from his experiences in these troubled times.” a finance ministry press statement revealed.” Read here
"I don't think it will have any impact on (foreign investment). This is only one case. In the US, we have seen all the icons that had this problem. So this is very (small) compared to what we have seen in the US," Kamal Nath, Commerce Minister said.
"We are in touch with Ministry of Corporate Affairs. We are also in discussion with them as to what steps need to be taken from the perspective of power they have under the law and Sebi has under the law," Sebi chairman C B Bhave said.