Satyam a Lie

A “True Lie” infact. Ironically, Satyam means truth. Chairman and promoter Ramalinga Raju confessed that the Hyderabad based Satyam Computers has been lying to its shareholders, employees and the entire world for many years. Regarded as India’s largest ever corporate fraud, it is estimated that the scam is more than 7,000 crore.

Considered to be the fourth largest [or was the fourth largest] IT company after TCS, Infosys and Wipro, Satyam has been cheating its shareholders, employees and clients by manipulating the revenue and profit sheets and thus boosting cash inflows. Satyam has also reportedly shown interest income when actually nothing existed.

On Wednesday, the entire India was shaken when Ramalinga Raju confessed before the Satyam board and Sebi with a letter of guilt and resignation. The companies stocks plunged shaking the already shaken market. The largest ever IT scam is another serious blow to the Indian IT sector.

The stocks have had a freefall after the confession. By end of day, the large-scale selling especially by foreign institutional investors has brought down the stock by 78%. Comparing the Rs 225 closing price on December 15th, the stock has come down by more than 82% to just Rs. 40.

Satyam Computers
Satyam Computers

Satyam has been boasting that 185 Fortune 500 companies are its clients. The company also was listed on the New York Stock Exchange and has 53,000 employees. Now that there is actually no Rs. 7000 crores, one would wonder how it will pay the entire salary bill of Rs. 5,040 crore.

How did all these things happen in a day? Its all failure in politics. Raju, a politician turned entrepreneur, tried to help his sons fallen companies, Maytas Properties and Maytas Infra by acquiring them. He even devised a plan to divert $1.6 billion Satyam revenues to acquire them. This sent a negative signal to all shareholders who strongly demanded that the plan be stopped. Raju had to withdraw his deceiving plans.

On Tuesday, DSP Merrill Lynch had written in a letter to Satyam and Sebi that it would be terminating its 10 day old agreement with Satyam due to material accounting irregularities. The aftermath continued on Wednesday with Sebi, Department of Company Affairs, Stock exchanges, Institutional investors, shareholders and the Indian Chartered Accountants Institute announcing actions against Raju, Satyam and all its auditors.