PORTFOLIO MANAGEMENT GAMEAND FINANCIAL JOURNALSIM

PRESENTED BY –

SUPRITHA K.S

SUJEETH N

WWW.PROFITSYSTEM.IN

09590902468

INFO@PROFITSYSTEM.IN

SATYAM SCANDAL

THE COMPANY

• Satyam Computer Services Limited was an Indian IT services

company based in Hyderabad, India . The company was listed on

the Pink Sheets, the National Stock Exchange and Bombay Stock

Exchange. It offered a range of services, including software

development, system maintenance, packaged software integration

and engineering design services.

• Satyam Computers was founded in 1987.

• It was converted into Public Ltd Co. in 1992.

• Satyam was listed in Indian Stock Exchange in 1991.

• In 1999 Satyam Infoway (SIFY) becomes the First Indian Internet Company listed On

NASDQ.

• In 2001 Satyam was listed on the New York Stock Exchange.

• In 2003 Satyam became the provider of IT Services to World Bank.

• Satyam’s revenue crossed 1 billion in 2006 , sets up the first “Global Innovation Hub”

in Singapore and operation in China.

• In 2008 Satyam received “Golden Peacock Global Award” for Excellence In Corporate

Governance.

PEOPLE BEHIND THE SCANDAL

• Ramalinga Raju : Satyam former chairman.

• B Rama Raju : Brother of Ramalinga Raju & Former Managing Director.

• V Srinivas : Ex-Chief financial officer.

• S Gopalakrishnan: Price Waterhouse Auditor.

• Talluri Srinivas : Price Waterhouse Auditor.

• 16th December 2008 : Satyam board announces the decision to buy the stake in Maythas

infrastructure company owned by the promoter family of Satyam for $ 1.6billion

17th December 2008 : Satyam calls off the Maytas deal as a result of investor revolt

• 18th December 2008 : Satyam announces a board meeting on December 29th says it will consider

buy back.

• 22nd December 2008 : Two independent directors say board didn’t fully sign off on takeover

valuation

• 23rd December 2008 : World Bank confirms an eight year ban of data theft and bribery

• 26th December 2008 : 1st independent director Dr. Mangalam Srinivasan resigns from Satyam

board.

• 28th December 2008 : 4 board members resign in wake of Maytas controversy. Market speculation

talks over hostile takeover by peers.

• 7th January 2009 : Mr. Ramalinga Raju resigns and confesses financial irregularities in the books

of accounts to the tune of Rs7136crore.

• The balance sheet as of september30th , 2008 showed-Inflated (non-existent) cash

and bank balances of Rs5040crore (as against Rs5312 core reflected in the books)

• An accrued interest of Rs376crore which is non-existent

• An understated liability of Rs1230crore on account of funds arranged by BR

RAJU.

• An overstated debtors position of Rs490crore (as against Rs2651 reflected in the

books).

• The revenues made by company were overstated.

IMPACT OF THE SCANDAL

• Before the Scandal it’s share price was Rs300 in oct.2008. Just after this scandal the share price went down to Rs175(6th January) (77% downfall).

• Immediately following the news, Merrill Lynch (now a part of Bank of America) and State Farm Insurance terminated its engagement with the company. Also, Credit Suisse suspended its coverage of Satyam.

• SEBI, the stock market regulator, also said that, if found guilty, its license to work in India may be revoked.

• Satyam was the 2008 winner of the coveted Golden Peacock Award for Corporate Governance under Risk Management and Compliance Issues, which was stripped from them in the aftermath of the scandal.

• The New York Stock Exchange has halted trading in Satyam stock as of 7 January 2009.

• The GDP fell by 0.4%.

• India's National Stock Exchange had announced that it will remove Satyam from its S&P CNX Nifty 50-share index on 12 January

• Satyam stock goes into free fall, plunges 78% in a single day within two days the share price fell to rs6: an all time low.

• BSE Sensex fell by 749.05 i.e., 7.25%.

• NSE fell by 192.40 points i.e., 6.18%.

• Company worth 11464crore collapsed to 1607crore.

• Compared to highest of Rs524.90/- on may 29,2008.

• Shareholders loose Rs9374crore in a day. Employees lost jobs, all hopes shattered.

• PricewaterhouseCoopers was the statutory auditor of Satyam Computer Services when the report of scandal in the account books of Satyam Computer Services broke. The Indian arm of PwC was fined $6 million by the SEC (US Securities and Exchange Commission) for not following the code of conduct and auditing standards in the performance of its duties related to the auditing of the accounts of Satyam Computer Services.

AFTERMATH OF THE SCANDAL

• On 13 April 2009, via a formal public auction process, a 46% stake in Satyam was purchased

by Mahindra & Mahindra owned company Tech Mahindra, as part of its diversification

strategy.

• Effective in July 2009, Satyam rebranded its services under the new Mahindra management as

"Mahindra Satyam".

• After a delay due to tax issues Tech Mahindra announced its merger with Mahindra Satyam on

21 March 2012, after the board of two companies gave the approval. The companies are

merged legally on 25 June 2013.

Thank you