(3 votes, average: 3.67 out of 5)When Ramalinga Raju, a man who has been in the corporate world for 20 years tried to push Maytas deal, I suspected something is fishy. Finally the cat is out of the bag.
He has revealed the Satya (truth) about Satyam at least for once.
“Sorry I have been cheating you all these years. Today I couldn’t do it anymore as it has reached an unmanageable proportion. I have been cooking up books all the while and its one damn lie. Accounts have been fudged and there is no cash at all.”
We have seen stock market scams but corporate fraud of this proportion is unheard of in India. Yesterday was one of the nightmarish days in corporate India.
This will have a terrible impact on the IT sector in particular and Indian economy in general. Think about an investment banker sitting in New York who wants to invest money. He will be telling himself, “I can’t believe these numbers anymore. Let me not get tricked by these figures and trapped
into unwanted scandalous circumstances. It’s only for the good to avoid this market”. Investor community will de-rate our market like what has happened to the Russian market. This fraud will have ramifications on investor confidence.
A person like Ramalinga Raju, who founded Satyam and took it to such heights and one who is considered a local hero has become a zero today. As a common man today I am forced to think twice before believing in any individual’s credentials and integrity.
Share holders and employees are the worst hit in this fiasco. Satyam is an F & O scrip and yesterday morning it was at Rs 116 and by afternoon it reached Rs 50.
The stakeholders, especially LIC and Fidelity who hold more than 5% of stake each (more than promoters’ stock), should take up the battle against the Satyam management. It’s good that Maytas deal didn’t go through as it would have given opportunity for Raju to transfer non existing cash to Maytas and continue with the Satyam drama.
This brings into light the role of other partners in crime – the audit firm PWC and the independent directors.
For 6 years PWC has been auditing Satyam’s books and didn’t even check the bank and cash balances of the company. We think that the big 5 audit firms do a great job. Enron debacle proved it wrong. And now Satyam fiasco has confirmed that these top 5 audit firms are as immoral as any other crooked auditing firms.
Also this raises questions about the role of Independent directors. They are supposed to be independent and ask the right questions and oversee that the objectives of the firm are met. All the independent directors are highly reputed and they didn’t even bother to check the balance sheet even once. I strongly believe that they are also aware of this. 5000 crores is not a small amount that can be withdrawn from the bank and get away without anyone’s knowledge. What is more surprising is that no one has even asked for the CFO without whose knowledge this could have happened.
To restore faith in investors and investment community all the directors should be arrested immediately and put behind bars; their assets confiscated.
I fear that there are other companies that are hiding skeletons and the appropriate actions taken now should send a strong message to them that frauds of this nature will not be taken for granted.
When issues like these come to light everyone remembers and recollects the phrase ‘Corporate Governance’ Most of the time it has remained a seminar topic and not a real life practice. Government and Institute of CA’s should come out with a concrete course of action to prevent this kind of frauds in future and take measures to implement corporate governance rules.
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January 9th, 2009 at 12:34 am
Well there can be more to the story. Maybe the fictious cash did exist and may hve been used by Raju to satisfy his apetite for land. In india lying is bad but atleast better than theft. Its like he has confessed that Satyam had only Rs50 when it was said to have Rs500. But Maybe Satyam did have Rs500 but Rs450 was siphoned off by Raju and now he is saying that it was only Rs50.
Think abt it. which software company operates at 3%margin?
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January 9th, 2009 at 12:55 am
Hi Pranesh,
R.L.Raju who hails from an aristocrat family of Bhimavaram (Andhra Region of A.P). He did not have the thick skin and financial expertise to keep all these inflated figures with himself alone for long as he was suffocating with a conflicting mental agony. What if had he been like his compatriots who have all the required qualities and courage to keep the financial manipulations without being noticed for ever? Keep your eyes open and urge the Authorities to be faithful to their job. Look at the link below:
http://indiaspecial.net/issues/unfolding-the-truth-the-agony-of-an-informer/
Warm regards
Chandra
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January 9th, 2009 at 2:25 am
Here is a little Nursery Rhyme for all of you -
Raju Raju Yes Baba, Cheating U.S. No Baba, Telling Lies No Baba, Open Your Balance Sheet HA HA HA!
Jokes apart, its sad that a company of this calibre has goes for a toss. I seriously wonder how many more are in the pipeline. I fail to understand the concept of yearly Audits and SEBI control.. How could such a thing happen so easily.
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January 10th, 2009 at 9:08 pm
I am sure it will take some more weeks or months before we will have more clarity on what exactly happened (or may b we will never) but I have my doubts if I have to believe that its was just a mess created by 1 person. I am sure there are other fishes in this well, which are now hiding under the kingmaker Raju. Regardless, what has happened is a serious damage to Hyd, AP, Overall India and most importantly to 50K+ Satyamites. Pity those employees actually. I guess unless there is a quick damage control by the new board (hopefully – if it doesn’t slip into our well know Indian bureaucracy) 2009 wont be any better than 2008 in terms of Market conditions.
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January 12th, 2009 at 12:10 pm
Virtual good news has started to come in after the appointment of the board which has the entire nation’s expectation that it will be able run through the maze and establish the crime, resulting in bailing out SATYAM from its current fiasco. More importance would be put into re-establishing the credibility of the firm which would obviously take a long time to accomplish. Hope, Deepak Parekh and Kiran Karnik will be able to stand up to the expectation.
However, their would be a mammoth number of questions which the auditors and the directors would have to answer before painting their shirt white and putting the entire blame on Raju and the CFO of the company.
Q1> The very important question of the company’s margin of just 3%. (As compared to 24-30% for its contemporaries)
Q2> PWC has been bagging 2.5 to 3 times the auditor’s remuneration amount as compared to the standard average given by the other top 5 firms.
Q3> World bank banned Satyam as whatever taps and clicks the World bank user’s were doing on their financial and HR site were being transferred to the Chennai’s Operation Center.
Q4> Upaid Solutions sued Satyam as it sold its patented ideas to other telecom majors.
Q5> Indiaworld Website, bought be Satyam for $116m, profit and revenues were never shared with the investors.
Their are lots of unethical questions like this which has to be answered..
Lets see how the board performs and the corresponding action taken by the regulators to fine tune the system or at least make sure that the rules which are their are followed with a little more sincerity.
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