Satyam: One among the many

A head reeling corporate scandal has been exposed. Satyam the fourth largest software giant of India has finally agreed its misdeeds. The fraud is above Rs.7000 crores. In the own words of Ramalinga Raju, 54 year old USA MBA returned founder chairman of Satyam “The gap in balance sheet arose because of inflaed profits over several years—Every attempt to eliminate the gap failed—It was like riding a tiger and not knowing how to get off without being eaten–. Reacting to this many of India Inc members termed it as an “isolated case”. When we dig deep into other corporate finances it will be clear that many are involved in such kind of fraudulence. In the past Worldcom, Xerox, Enron, Daewoo motors and other corporate bigwigs fell to the scandal games. The recession webbed AIG, Fannie Mae, Fradie Mac, General Motors, Citibank, and other companies point towards the spiraling corporate crisis for a long period of time. It is a matter of time and luck for others to get trapped by the public for forgeries and frauds.

 

Private sector came with a big bang accusing public sector companies as unaccountable and inefficient. After the full circle it is clear there is no thick line between the two. Whether public or private there is a thin line of ethics. What we need urgently to reform the corporate and any other sector of the society is generating higher ethical standards in all walks of life. The common problem across the board is the absence of moral values, responsibility shouldering and accountability.

 

After TCS, Infosys and Wipro,  Satyam holds the big name in the Indian software. The company is listed in the NYSE. It has 185 Fortune 500 companies with 53,000 employees on its pay roll which cost Rs.5040 last year. Following the World Bank’s debarring Satyam for 8 years for data stealing, investors’ objection to buying of Ramalinga Raju’s family companies like Maytas Properties and Maytas Infra for $1.56bn, DSP Merrill Lynch contract cancellation due to material accounting irregularities and other complex issues, Raju decided to surrender.

 

In collision with auditors and other important players, Satyam has fudged its accounts and balance sheets. In the Q2 September 2008, company announced a revenue of Rs.2,700cr. But the actual income was Rs.2,112cr which was less than Rs.688 cr lesser than the actual revenue. A 24% inflated revenue projection to boast to the shareholders and attract more investors. It also inflated cash and bank balances of Rs.5,040cr, Rs.376cr non-existent accrued interest, understated liability of Rs.1,230cr and overstated debtor position of R.490cr. The shareholders of Satyam are worst affected. The crisis wiped out Rs.9,376 crore in one day. From Rs.179.1 per share it fell down Rs.39.9 which is a loss of 78%.

 

Despite the presence of world’s best auditing company – Pricewater Coopers, M. Rammohan Rao, the dean of Indian School of Business, Harvard University’s Krishna Palepu and former cabinet secretary T.R. Prasad in the board of Satyam the scandal has happened. Pricewater Coopers, the company’s auditors, board members including Dr. Rammohan Rao should be penalized for oversight into this mega scandal.

 

More heads will roll if the scam is investigated length and breadth. Who’s who of the Indian governance system may have to face the axe. Due to the many political and crucial skeletons hidden in the Satyam cupboard, the full truth may not be out. Ramalinga Raju with the help of prorich pro criminal lawyers will come out on bail and roam freely with little dented image. After all his acquired wealth and real estates can keep his generations to come in the high social pedestal. Those who have money will be revered by the millions. This scandal is a death bell rang to the rich people, intellectuals, media and corporate world. They must organize their knowledge and wisdom properly to advise investors. Till then people like Ramalinga Raju can brand his company “Satyam” – truth and do Asatyam – false deeds.

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1 Comment

  1. Mumbai said,

    +00002009-01-08T22:40:50+00:00312009bUTCThu, 08 Jan 2009 22:40:50 +0000 2, 2008 at 7.27 p01

    I think he is still lying. The fraud that he is talking about is a simple fraud which is not so easy to hide. I am sure the auditors could have easily detected this fraud. Mint has an interesting perspective. They say that based on what he’s said, it’s impossible that Satyam would be operating on such a low operating marging of 3%. Hence the only logical thing is that he has siphoned off the money and this whole thing is a charade.


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