This presentation is on satyam scam & was created for educational purpose.this presentation include various aspects of satyam scam such as satyam Company Profile, satyam Achievements , Overview of the satyam scam, How the satyam scam started to unravel, Modus operandi of satyam scam, Impact Of satyam Scam, Regulatory action etc.

1. Satyam Scam
Presented by :- Vishal Narvekar

2. Company Profile
• Satyam computer services limited was founded in 1987 by
Mr. B. Ramalinga Raju
• Satyam computers started with only 20 employees
• The company offers consulting and information
technology services to various sectors
• Satyam computers converted into public ltd co. In 1991
• Listed in Bombay stock exchange in 1991
• Listed in New York stock exchange in 2001
• Listed in EURONEXT Amsterdam stock exchange in 2008
• There were 52000 employees working in satyam in September
2008

3. Achievements
• In June 1991 satyam made 185 clients from first fortune
500 companies
• In 1994 satyam made allies with Dun & Brad Street Crop
an USA based company
• In 2000 satyam was declared one of the 100 most
pioneering technology companies by World Economic
Forum
• In 2006 satyam ranked No. 1 in the ASTD award
(American Society For Training And Development)
• On April 14, 2008, Satyam won awards from MZ
consult's for being a leader in India in corporate
governance and accountability

4. Who is B. Ramalinga Raju?
• Ramalinga Raju was born on September 16, 1954 in Andhra
Pradesh
• He founded Satyam Computers and was its Chairman until January
7, 2009 when he resigned after admitting to commits corporate
fraud
• Awards
– Ernst & Young Entrepreneur of the Year Services Award 1999.
– Dataquest IT Man of the Year Award 2000
– Asia Business Leader Award 2002
– Ernst & Young Entrepreneur of the Year 2007 (revoked)
– Global Peacock Award for Corporate Governance 2008
(revoked )

5. Overview of the scam
• Accounting fraud of over 7800 crores rupees
• Past 7 years accounting books were cooked:
-Profits were inflated
-Understated liability and overstated debts
-Accrued interest (which was non-existent )
-The gap in the balance had risen due to inflated
profits
• Planned to buy the Maytas to fill the gap in the balance sheet

6. Responsible Parties
• Ramalinga Raju: Satyam Former Chairman
• B Rama Raju: Brother of Ramalinga Raju,
Former Managing director
• V Srinivas: Ex-chief financial officer
• S Gopalakrishnan: PriceWaterhouse Auditor
• Talluri Srinivas: PriceWaterhouse Auditor

7.  Stock markets around the world collapsed
during 2008 & the BSE fell from 21,000 to
below 8,000.
 The losses caused investors to withdraw
funds from the stock market.
 Satyams continuance positive results during
2008 , even in the economic crisis.
 In October 2008, satyam reported net income
of $132.3 million, an increase of 28 percent
from the same quarter of the previous year.

8. Saytam asserted that, despite the challenging
environment, it continued to find
opportunities for growth.
During October, one stock analyst drew
attention to large cash balances in non-
interest bearing bank accounts & expressed
concern about the large balances and the
accuracy of the numbers.
Investors ignored the analyst's and the stock
price rose with the reports of positive
earnings and revenue growth.

9. In December 2008, Board of Directors
approved the purchase of Maytas Properties
and Maytas Infrastructure, two companies
unrelated to the information technology field.
At the time, Mr. Raju and the Board
anticipated that the market would "be
delighted" by the two transactions as it would
provide Satyam with greater diversification.
However, investors were outraged over the
transactions because Mr. Raju's family held a
larger stake in Maytas Properties and Maytas
Infrastructure.

10.  Shareholders viewed the transactions as an
attempt to siphon money out of Satyam into the
hands of the Raju family.
 Satyam quickly aborted the transactions, but the
incident still caused significant damage to
Satyam's reputation as a well-managed company.
 After the incident, satyam's shares dropped
nearly 10 percent and four of the five
independent directors resigned.
 On december 30, analysts with Forrester research
advised clients to stop doing business with
satyam because of the fear of widespread fraud.
 Satyam hired Merrill lynch to advise it on ways to
increase shareholder value.

11. On january 7, just hours before Mr. Raju
disclosed the fraud, Merrill lynch sent a letter
to the stock exchange indicating that it was
withdrawing from its engagement with satyam
because during the course of its
representation it found accounting
irregularities.
On January 7, 2009, Mr. Raju sent letter to
Satyam's Board of Directors admitting that he
manipulated the company's accounts for
numbers years.

14. Major points in letter
• On January 7, 2009, Mr. Raju disclosed in a letter to
Satyam's Board of Directors that he had been manipulating
the company's accounting numbers for years.
• Mr. Raju said the manipulation started out small, and grew
larger by the year.
• In the letter he stated, "It was like riding a tiger, not
knowing how to get off without being eaten."
• Mr. Raju stated that eventually, the stress of hiding the
fraud grew too much for him to bear.

15. Modus operandi

16. Fake Accounts
• Mr.Raju overstated income in every quarter for several years to
meet analyst expectations.
• Mr. Raju created fake bank statements to advance the fraud.
• Mr. Raju created 6,000 fake salary accounts and appropriated
the money after the company deposited it.
• The global head of internal audit created fake customer
identities and generated fake invoices against their names to
inflate revenue.
• Mr. Raju diverted a large amount of cash to other firms that he
owned ,since 2004

17. Fake Balance Sheet
 Annual report of SATYAM as on September 30,2008.
CURRRENT ASSETS
Particulars Amt in CR.
ACTUAL DEBT WAS
Investment 618.64 2161CR,
Current Assets , Loan & Advance OVERSTATED 490 CR.
1.Sundry Debtor 2651.36 ACTUAL CASH IN BANK
2.Cash & Bank Balance 5312.62 WAS 321, INFLATED
5040 CR.
3.Other Current Assets- Interest Accrued On 376.34
Fixed Deposits
4.Loans & Advances 502.22 NO ACCRUED
INTEREST 376.34 CR.
LIABILITIES
Particulars Amt in CR.
Current liability & provision UNDERSTATED
LIABILITY by
1.current liabilities 1669.20 1230 Cr.

18. Role Of Auditors
• Global auditing firm Price Waterhouse Coopers audited Satyam's
books from June 2000 until the discovery of the fraud
• This fraud was not committed overnight
• It was building up continuously from over years
• Satyam paid pwc twice what other firms charge for the audit.
• They ignored some of the obvious indications of scam, which
could have been caught much before it acquired the ‘massive’
status

19. Indications Of Scam
• $1.04 billion non-interest bearing deposits in balance sheet.
• According to accounting professionals, a reasonable
company would have either invested the cash or returned
the excess cash to the shareholders.
• Auditors did not verify with the banks in which satyam
claimed to have deposits.
• The fraud went on for a number of years and involved both
the manipulation of balance sheets and income statements.
• Whenever satyam needed more income to meet analyst
estimates, it simply created fictitious sources and it did so
many times without the auditors ever discovering.

20. The Maytas Acquisition
• Maytas infra and Maytas properties : firms
owned by the sons of Raju.
• A property development company founded in
2005

21. • The Raju family directly owned about one-
third of each in the two companies.
• In December 2008 satyam Planned to buy the
Maytas.
• The company management said the
Acquisition will diversify the company.
• Real Plan was to fill the gap in the balance
sheet.

22. Impact Of Scam
• Jobs of over 50000 were at risk.
• India`s global image was suffered.
• Indian stock market fell dramatically.
• Biggest single day fall of 175 Rs. On Jan 6th in saytam share.
• SEBI said that, if Saytam found guilty, its license to work in
India may be revoked.
• The New York Stock Exchange halted trading in Satyam
stock.
• India's National Stock Exchange announced removal of
Satyam from S&P CNX & Nifty 50.
• The GDP fell by 0.4%.
• I.T sector suffered a downturn.

23. Regulatory action
• New board of directors were appointed.
• Disclosure of pledged securities.
• Increased financial accounting disclosure.
• Adoption of international standards.
• Creation of new corporate code of conduct by
Ministry of Corporate Affairs.