Telecommunications

Satyam Computer Services Limited

Last edited by nity68 on June 5, 2009 - 7:40am
Company Snapshot: 

Begun in 1987, Satyam Computer Services is the fourth largest IT Company in India, providing consulting, outsourcing, engineering and software solutions. Satyam describes itself as a global business and information technology company servicing more than 20 industries. The company went public in 1991 and is also listed in New York Stock Exchange (NYSE). Satyam says its revenues crossed the $1 billion (Rs 4800 cr @ Rs 48/$1) in 2006 making it the youngest IT company in India to reach this milestone. However, in a massive accounting scandal that erupted in January 2009, the company founder-chairman Mr. Ramalinga Raju admitted to having grossly over-reported the company's net worth.

Profile editor: 
dharmesh
Profile editor: 
nity68
Profile editor: 
Venkat T
Ownership status: 
Publicly traded
Number of employees worldwide: 
52865
Chief executive officer: 
A.S Murthy
Website: 
Satyam Computer Services Ltd.,
Tel: 
91-40-30654343
Fax: 
91-40-27840058
Net Income: 
Rs 1687.89 Crores (USD 329.77 million, @ Rs 50=USD 1)
Total revenue: 
Rs 8740.69 crores (USD 1748.13 million @ Rs 50= USD 1)
Corporate accountability
Accountability overview: 

In what is termed as India's own "Enron," a massive fraud was revealed after Satyam founder-chairman Mr.Ramalinga Raju confessed to an accounting fraud to the tune of US$1.45 billion (Rs.7000 crores @ Rs.48/US$1). Considered India’s largest financial scam, the Satyam controversy has exposed the lack of integrity of market regulators and auditing firms.

The investigations also revealed widespread illegal financial transactions worth millions of dollars between numerous subsidiaries and "benami" or proxy companies owned and controlled by Ramalinga Raju and his family members. Satyam Computers, Maytas Properties and Maytas Infra (companies owned and controlled by Ramalinga Raju and his family members) have acquired more than 17000 acres of land across Andhra Pradesh, Nagpur, Chennai and Bangalore.

Murmurs of irregularities began shortly after the company filed its balance sheet as of September 30, 2008. Since that time, the company chair was forced to abort two major acquisitions -- 100 percent of Maytas Properties, and 51 percent stake in Maytas Infra -- after major investors protested against it. See attached press releases titled "Satyam Maytas Acquisition Fails Dec 2008.html" and "Satyam Maytas Acquistion Announcement Dec 2008.html"

In the wake of the aborted acquisitions, three directors resigned from the company board on December 29, 2008. See attached press releases titled "Satyam Two Board members resign.html" and "Satyam one board member resigns.html."

Satyam Computer’s Board along with the newly appointed CEO Ram Maynampathi were sacked by the Government of India, which appointed a three member board chaired by Deepak Parekh to manage the company.

The company was stripped of the Golden Peacock Award for Excellence in Corporate Governance conferred in January 2009. While the former Chairman confessed to fudging accounts for the past 7 years, the Institute of Directors did not withdraw the award conferred in 2002. The company was considered to be a symbol of India’s growth story, showcasing to the world the global competitiveness of India’s entrepreneurs. This has also raised serious doubts on the credibility of such awards commending corporate achievements.

Anti-competitive and consumer protection: 

In December 2008, the World Bank banned all contracts to Satyam for a period of eight years over charges of corruption. According to the World Bank "Satyam was declared ineligible for contracts for providing improper benefits to Bank staff and for failing to maintain documentation to support fees charged for its subcontractors." [See press release titled "The World Bank Group Statement on Debarment of Satyam. December 23, 2008.]

Political influence (national and international): 

In February 2009 an investigating officer looking into the tax irregularities of Satyam went public about her experience of dealing with political influence of the company to thwart her investigations. Satyam had managed to influence senior officers in the Income Tax Department who in turn made attempts to block the report on the investigations.

Effective cross party political lobbying gained Satyam the trust of successive State Governments in Andhra Pradesh. Satyam's promoters seem to have translated this bon homie primarily into securing massively subsidised and facilitated land deals across Andhra Pradesh. Satyam managed to fence off nearly 17000 acres, mostly in the form of government subsidies for various projects. It is alleged that Andhra Pradesh government allotted land at very cheap rates. In one instance, the government allotted 50 acres of land in Vishakapatnam at Rs 10 lakhs (USD 20, 000) per acre where as only a month earlier, the Vishakapatnam Urban Development Authority auctioned land at a rate of Rs 5 Crores (USD 1 million) per acre.

A health charity named Emergency Management and Research Institute (EMRI) run by Satyam is currently being sued in court for corruption. The charity faces charges of land grab and misuse of government funds it receives under the National Health Mission.

Social responsibility: 

Byrraju Foundation was set up in July 2001 in memory of Late Byrraju Satyanarayana Raju, the founder of the Satyam group of companies. The Foundation worked to provide services in healthcare, environment, sanitation, primary education, adult literacy and skills development in 200 villages in six districts of Andhra Pradesh. In April 2009 nearly 350 employees of the foundation resigned from their jobs as a fallout of the Satyam scandal. The Ramalinaga Raju family that supported the foundation was unable to continue its financial assistance to the foundation due to legal reasons.

Providing safe drinking water appears on the list of mandates for the foundation which so far claims to provide water to 52 communities across Andhra Pradesh. The foundation also specializes in providing water installation assistance to various other agencies and corporations including Dow Chemical notorious for the Bhopal Gas Tragedy. Dow has installed two plants in two districts of Andhra in November 2006 and October 2007 with assistance from the Byrraju Foundation.

Corporate Governance

In December 2008, shareholders shot down a decision of the directors of Satyam Computers to acquire Maytas Infra and Maytas properties ltd for $ 1.6 billion. Satyam shares plunged more than 50% in NYSE, forcing the chairman to withdraw the decision. This attempt at acquiring companies owned by the promoters was being looked at as a serious transgression of the norms of corporate governance.

Eventually, in a shocking development Satyam founder and chairman Ramalinga Raju confessed to inflating the revenues and profits of the company by over $ 1 billion with non existent cash balance and assets. He resigned owning responsibility for this scandal.

PriceWaterhouse Coopers - Auditing the scandal

The mega accounting fraud that was revealed has thrown serious doubts over the already beleaguered credibility of auditing firm PriceWaterhouse Coopers. The police arrested two senior PWC staff for their involvement in the scam. The Institute of Charted Accountants of India (ICAI) has initiated enquiry into the involvement and/or negligence of PWC in connection with the Satyam scam.

Tech Mahindra takeover

On April 13 2009 the Tech Mahindra group won a takeover bid of Satyam Computers. Tech Mahindra agreed to subscribe to and acquire 30,27,64,327 shares of the Company (the “Initial Shares”), representing 31% of the share capital of the Company at a price of Rs. 58 per share thereby agreeing to infuse Rs. 1,756 Crores (or approximately US$ 351 million based on the exchange rate of Rs. 50 to US$1) into the Company.

Financial information
Stock ticker symbol: 
SATYAMCOMP (NSE)
Fiscal year: 
2007
Fiscal year: 
2007
Major lines of business/segments: 

Application Services, BI & PM, Business Process Outsourcing, Business Value Enhancement, Consulting and Enterprise Solutions, Infrastructure Management Services, Integrated Engineering Solutions, MES and LIMS, Oracle Solutions, Product and Application Testing, Product Lifecycle Management(PLM), SAP Solutions, Six Sigma Consulting, Supplier Relationship Management, and Supply Chain Management.

Link to annual report: 
21st Annual Report 2007-08
Specialized Information
Major units/subsidiaries/affiliates: 

Satyam BPO, Nipuna Services, Knowledge Dynamics, Nitor Global Solutions, Ca Satyam ASP, Satyam Venture Engineering Services

AttachmentSize
Ramalinga Raju's Letter of Confession.pdf157.28 KB
Shareholding patter Satyam computers Jan 2009.pdf27.36 KB
Satyam Maytas Acqusition Fails Dec 2008.html4.39 KB
Satyam Maytas Acquisition Announcement Dec 2008.html9.16 KB
Satyam two board members resign.html5.35 KB
Satyam one board member resigns.html4.93 KB