06th February 2009
This article will make you understand the Satyam Scam that happened between December 23rd 2008 to January 31st 2009 and which still continues.
Ramalinga Raju, the former Chairman of Satyam was found guilty of routing the cash funds from the company to his personal account for several years. He misrepresented the bank statements to the auditors of the company and as a result the fraud was unknown for several years. This accumulated to Rs.7200 crores which he had adjusted in several areas such as inflating cash and debtors balances and by deflating the current liabilities such as the creditors.
He planned several times to hide these malpractices but all of them failed. So as a last step he planned to acquire his Son’s Maytas Infra and Maytas Properties for which the shareholders did not approve, as most of them felt that he was doing for his personal benefits. On the same day the market value of Satyam shares came down by 80 to 100 rupees which was trading around Rs.300. So in order to increase the market price he announced the Buy-Back of shares because of which the market price again recovered. He used this golden opportunity to sell his shares and thereby reducing his stake to 2.6% from 8% and he also cancelled the buy-back of shares which for a second time reduced the market price.
Subsequently he wrote a letter to SEBI and BOD confessing the malpractices and fraud. In a letter to the board of directors, Raju states that “Satyam’s balance sheet as on Sep 30, 2008, carries an inflated (non-existent) cash and bank balances of Rs 5,040 crore (as against Rs 5,361 reflected in the books). Further, it carries an accrued interest of Rs 376 crore which is non-existent. An understated liability of Rs 1,230 crore on account of funds arranged by me. An over stated debtor’s position of Rs 490 crore (as against Rs 2,651 crore in the books). The letter further states that the gap in the balance sheet has arisen purely on account of inflated profits over a period of last several years”
The moment it was announced, the market value touched the bottom line of Rs 6 in NSE and Rs 11 in BSE. This Blue Chip Company was trading around Rs 800 before 1 year. This issue pulled the entire market down to the extent of 700 points (BSE) within a fraction of second.
As the second phase the government constituted the new Board of Directors and it appointed the Statutory Auditors as KPMG and Delloite and the Internal Auditor as Brahmaya & Co.,
Now the Satyam is recovering to its early life. Inspite of the fraud, it is getting several contracts. Companies such as iGate, L&T and M&M are showing interest to acquire the fraud-hit-company.
Ramalinga Raju, the former Chairman of Satyam was found guilty of routing the cash funds from the company to his personal account for several years. He misrepresented the bank statements to the auditors of the company and as a result the fraud was unknown for several years. This accumulated to Rs.7200 crores which he had adjusted in several areas such as inflating cash and debtors balances and by deflating the current liabilities such as the creditors.
He planned several times to hide these malpractices but all of them failed. So as a last step he planned to acquire his Son’s Maytas Infra and Maytas Properties for which the shareholders did not approve, as most of them felt that he was doing for his personal benefits. On the same day the market value of Satyam shares came down by 80 to 100 rupees which was trading around Rs.300. So in order to increase the market price he announced the Buy-Back of shares because of which the market price again recovered. He used this golden opportunity to sell his shares and thereby reducing his stake to 2.6% from 8% and he also cancelled the buy-back of shares which for a second time reduced the market price.
Subsequently he wrote a letter to SEBI and BOD confessing the malpractices and fraud. In a letter to the board of directors, Raju states that “Satyam’s balance sheet as on Sep 30, 2008, carries an inflated (non-existent) cash and bank balances of Rs 5,040 crore (as against Rs 5,361 reflected in the books). Further, it carries an accrued interest of Rs 376 crore which is non-existent. An understated liability of Rs 1,230 crore on account of funds arranged by me. An over stated debtor’s position of Rs 490 crore (as against Rs 2,651 crore in the books). The letter further states that the gap in the balance sheet has arisen purely on account of inflated profits over a period of last several years”
The moment it was announced, the market value touched the bottom line of Rs 6 in NSE and Rs 11 in BSE. This Blue Chip Company was trading around Rs 800 before 1 year. This issue pulled the entire market down to the extent of 700 points (BSE) within a fraction of second.
As the second phase the government constituted the new Board of Directors and it appointed the Statutory Auditors as KPMG and Delloite and the Internal Auditor as Brahmaya & Co.,
Now the Satyam is recovering to its early life. Inspite of the fraud, it is getting several contracts. Companies such as iGate, L&T and M&M are showing interest to acquire the fraud-hit-company.
