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Satyam Saga

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Satyam Set up in the year 1987 to

provide services in IT sector

Indias 4th biggest softwarecompany in India

It is listed in BSE, NSE, NYSEand Euro next (Amsterdam).

BSE IPO oversubscribed 17times when made public in1991

The company employs 53,000IT professionals acrossdevelopment centers in 6

First IT Company in the World

Certified under ISO9001:2000

Ranked Among Indias Top 10

Best Employers, 2004 and 2003

Top 13 Best-Managed Companies

in India

Winner, Corporate Citizen I

award for Corporate Social

Responsibility

SAP Pinnacle Award 2008

Satyam Won golden peacock

award for excellence in Corporate

Governance on Global level for 2nd

time United Kingdom Trade and

Investment India Business Award for

Corporate Social Responsibility

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Chairman and founder Satyam

Computers Services Limited

Winner of Ernst & Young entrepreneur

of the year award in 2007

He became the Managing Director

and Chief Executive Officer in 1991

Before 1997, he was with Maytas Infra

Limited as one of its Directors

B. Ramalinga Raju

Founder & Chairman, SatyamComputers Ltd.

B. Rama Raju

Promoter & CEO, Satyam

Computers Ltd.

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Satyam Decade at a Glance

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Fabricated Income Statements

Details of cash balances with Scheduled banks are notthere in the Annual report

Question raised by Equity analyst Kawaljeet Saluja

$500 mn cash parked in current account

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5,040 + 376 +470 (Rs. Cr)

Rs. 1,230 Cr Rs. 7,136Cr

Overstated cash

balances, Incomereceivables

Understated

Liabilities Fraud Amount

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World Bank banned Satyam from doing any of its work after it

found Satyam employees had hacked into its system and gained

access to sensitive information

It also did not renew their fiveyear contract

Slippery Slope to Disaster

December08 brought news of pending litigation by a former client,

online mobilepayments service Upaid Systems which filed a case of

intellectual fraud and forgery against Satyam in 2007

On Dec. 16, when Raju announced the company would spend $1.3 billion

to buy Maytas only to reverse the decision a few hours later under

shareholder pressure

Satyam ADRs lost 50% of their value overnight

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SatyamDec-2008 to Jan-2009

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Problems created

Negligence of fiduciary duties, maintenance of ethical

standards and

CSR in attempt of covering up for accounting gap created by

cooking up financial books over the years

Causes of the problem

Power of greed overshadowed the responsibility to meet

fiduciary duties.

Low ethical and moral standing of the top management.

External factors are fierce competition and the need to

impress the investor,

analyst, shareholder, and stock market

Causesof the problem

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Analysisof the Causesof the Problem

o Greed for money is not the only greed:

Greed for power, competition, success, prestige (as Mr Raju did

in many accolades and awards) may compelled the highly

educated man to work unethically which resulted in violation of

fiduciary duties by the executive and independent directors of thecompany.

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Analysis of the Causes of the Problemo Low ethical and moral standards as they involved

in following :

Fudging Numbers: Pumped up revenue, profit, bank

deposits, and cash reserve numbers.

Undisclosed pledges: Procured a loan of Rs.1230 crores

without disclosure

Insider trading: Sold most of his 26% stake whiletweaking numbers to keep share price high.

Take Over code: Probable violation if he knew when his

stake fell below 5%

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Analysis of the Causes of the Problem Satyam had incurred the loan of Rs 1230 crores fromvarious sources so they were under a pressure to show

rosy picture of a company otherwise creditors would

have been skeptical.

Satyam did focus on the short term gains rather than

long term strategies to flourish the company thereby

engaging in cooking up the accounting books

And then without consideration of shareholders in

order to rectify the gap made an attempt to buy

share in sister concern Maytas for $1.3 billion which

was although granted by board but shareholdersexperienced an objective conflict of interest.

However, the deal was called off.

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In the News..

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Marketing AspectOf

Satyam Saga

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Satyam Clients

A total of 650+ Clients185 of the top fortune 500

Companies

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Satyam, which specializes in business software and offers

backoffice outsourcing and consulting, had very high profile

clients & counts

General Electric, Nestle, Qantas and Fujitsu among its major

customers.

But with skeletons coming out of the closet, during the scam

customers were unlikely to renew contracts when they came

up for review, analysts said.

As a result of the SCAM

Satyam was foreseen losing some of its clients to

MNCs such as IBM, HP and Accenture.

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Nestle, the world's largest

food company, has been a

Satyam client since 2004.

In 2007, it extended its

engagement with the

Indian IT firm for another

three years, landing it a

new multimillion dollar

contract.

GE, the largest client for

Satyam, was learnt to be

evaluating options of

inducting the Satyam teamworking on its IT project & a

source familiar with the

matter said talks are on with

other outsourcing vendors.

Satyam's bigger rival Tata

Consultancy Services (TCS)

was considered & also provided

services to GE.

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Clients were looking out and so were

the employees

And companies were fine with clientsapproaching them, but had a moral issue

if employees approached them?

How fair is that?

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H.R Aspect

ofSatyam Saga

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Employees It was nights and heartburns for the over 53,000employees of Satyam Computers as they conjured upworst case scenarioslike nonpayment of salaries, project cancellations ,layoffs and equally bleak prospects outside.

As the company's management tried to reassureshocked employees, jobs sites had got flooded withresumes of hundreds of Satyam employees.

Job consultants believed that in the current economicclimate , Satyam employees might have to settle forlower salaries outside.

It was an Employers' Market

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The question here is ????????

Everybody wants Satyam clients, but not

employees?

Well, if you take the head out, tail will follow

if Satyam clients move away, employees will

( have to) quit and thanks to all these we

wont take you slogans, these employees were

available for cheap.

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This is where one has to respect a company like

Wiprowhich made it clear that they will treat Satyam

employees as any other candidate and will evaluate

them on same scale i.e. be fair to clients as well as

employees.

And Wipro stated,

Respect Talent thats what grows an industry,

especially in these times when one is looking forward

to mature action from the industry.

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Each company said to itself.

We applaud government for takingquick action in setting up the board

(and restoring confidence on Indian IT

industry) now it was time to ask

Satyam competitors to go easy on

their mouth.

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AFTER THE SCAMNew CEO and special advisors

- On 5 February 2009, the sixmember board appointed by the

Government of India named A. S. Murthy as the new CEO of

the firm with immediate effect.

Murthy, an electrical engineer, has been with Satyam since

January 1994 and was heading the Global Delivery Section

before being appointed as CEO of the company.

The twodaylong board meeting also appointed Homi

Khusrokhan (formerly with Tata Chemicals) and Partho

Datta, a Chartered Accountant as special advisors

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Acquisition by Mahindra

Group

On 13th April 2009, via a formalpublic auction process, a 46% stake inSatyam was purchased by Mahindra

& Mahindra owned company TechMahindra, as part of itsdiversification strategy.

Effective July 2009, Satyamrebranded its services under the new

Mahindra management as "MahindraSatyam" with a new corporate

website www.MahindraSatyam.com.

C.P Gurnani is the current CEO.

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Restatement of Results

As a result of the scandal, under the directions of the new

Mahindra management team, Satyam Computer Services

restated its financial results for the period 2002 to 2008.

These restated results were published in September 2009.

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