Wednesday, January 7, 2009

SATYAM REVEALS FRAUD

In the biggest fraud of its kind in recent corporate Indian history, the chairman of Hyderabad-based Satyam Computer Services Ltd. has admitted to inflating the companies balance sheets and reporting non-existent assets amounting to over Rs. 5,000 crores, with additional unreported liabilities taking it up t Rs. 7,000 crores.

Company Chairman Ramalinga Raju resigned today while announcing the huge fraud. He said that the companies false assets were created several years ago, starting from a small difference in reported and actual profits to this huge amount, accumulated as the company grew. He described it as "riding a tiger, not knowing how to get off without being eaten." He said that no other board member had any knowledge of the fraud. 

He said that he was now ready to face the law of the land. Indeed, he will face the ire of both Indian and American regulators (Satyam (SAY) is listed on the NYSE, the BSE and the NSE). Following the news, Satyam's stock on the BSE shed a massive 80% of its value. The sensex fell by over 7%. 

The promoter also revealed that his failed bid to acquire Maytas Infrastructure Ltd. was an attempt to replace non-existent assets with real ones, but that deal failed after shareholder outrage. The company had hired DSP Merrill Lynch to explore options for merger, but the investment bank has reportedly terminated its operations. 

Satyam is the country's fourth largest software exporter and employs 51,000 engineers. Andhra Pradesh CM YSR Reddy has said that he would not let such a large company collapse and create widespread unemployment. He will be looking into the fraud. In Raju's letter to employees, he also hinted that the company might need some Government Assistance.

[With inputs from NDTVProfit.com and IBNLive]

1 comment:

ADITYA said...

dude u gt ur numbers wrong its sumwhre btween 7000-8000 crs