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Satyam Fiasco
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SATYAM
Set up in the year 1987 to provide services in IT sector
Indias 4th biggest software company in India
It is listed in BSE, NSE, NYSE and Euronext
(Amsterdam).
BSE IPO oversubscribed 17 times when made public in
1991
The company employs 53,000 IT professionals across
development centers in 6 continents
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> Chairman and founder Satyam
Computers Services Limited
> MBA from Ohio University
> IT man of the year award by Data Questin 2002
> Winner of Ernst & Young entrepreneur
of the year award in 2007
> He became the Managing Director and
Chief Executive Officer in 1991
> Mr. Rama Raju holds a Master of
Economics degree from Loyola College,Chennai and a MBA degree from Loredo
State University, Texas
> Before 1997, he was with Maytas Infra
Limited as one of its Directors
B. Ramalinga RajuFounder & Chairman, Satyam
Computers Ltd.
B. Rama RajuPromoter & CEO, Satyam Computers
Ltd.
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Satyam Clients
A total of 650+ Clients
185 of the top fortune 500
Companies
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Satyam Share holding Pattern
Institutional & Non-
Institutional Shareholders
LIC 4.34%
L&T 4%
Lazard
Aberdeen 13.16%
Fidelity
ICICI Prudential
Citigroup
JP MorganTotal Market capitalization of Rs.
15,262 Cr
(As on Dec 16, 2008 )
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Satyam Decade at a Glance
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Maytas Infrastructure
The Rajus hold 36.64 per cent while
institutional holding is 10.92 per cent
The company had raised Rs 327.45 crore
through IPO.
It had a turnover of Rs 1,660 crore and net
profit of Rs 100 crore in the last financial year
Satyam planned to acquire 51 per cent stake
for Rs 1, 440 crore or $0.3 billion
Mr. Teja Raju(VC)
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Maytas Properties
Rajus family owns 35% of Maytas properties
Founded in 2005, it has a land bank of 6,800acres
It has clearances for three IT SEZs based on 148acres
An undisclosed stake is held by Infinite IndiaInvestment Management, a realty fund jointly
promoted by JM Financial and US-based SRMInvestments, which invested Rs 600 crore inFebruary
B. Rama Raju Jr. (VC)
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So, How did it all began?
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16 Dec2008
Satyam backs out ofMaytas deal citinginvestors protest
17 Dec2008
26 Jan2009
Major Clients ofSatyam expressdissatisfaction.Contracts worth$200 million up for
grabs
Satyam gets boardapproval for
controlling stake inMaytas Infrastructure
and Maytasproperties as fullyowned subsidiary for$1.6B (Rs. 8000 Cr.)
Satyam shares plunge55 percent in NYSE.BSE share plunges over
30%
Board meeting to beheld on Dec 29 forproposed buyback of
shares
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19Dec
23Dec
206Jan2009
British mobile solutionprovider Upaid files a law suit
against Satyam in a district
Court in the US over Maytas
deal. May face $1 Billion in
penalties
20Dec
Centre refersSatyam dealto Registrar ofCompanies
(RoC)
World Bank bans Satyam for 8 yearsdue to inappropriate payments to
staff and inability to provide
information sought on invoices
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26Dec
28Dec
26 Jan2009
Board announcesexploring optionfor buyback of
shares to restoreinvestor
confidence
1st independent
director Dr.MangalamSrinivasan
resigns fromSatyam board
29Dec
3 more Independent Directors resign.Mendu Rammohan Rao, Krishna G
Palepu and Vinod K Dham
Satyam asks DSPto review board
structure
Rumors in marketabout strategic
takeover by IBM,Accenture
IL&FS sells 44.1 lakh sharespledged shares of Satyam
promoters in 1 day.Promoters equity reduced
from 8.6% to aprrox 7%
Promoters disclose that their
entire holding in Satyam
pledged with institutional
lenders since 2006
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30Dec
02Jan
26 Jan2009
Postcancellation ofdeal, Maytas
looks for raising
$500 millionthrough sale of
equities andproperties
IL&FS sellsfurther 44.27 Lakh
pledged sharestaking the tally to1.5 crore pledged
shares
03Jan
Satyam board confirmspromoters stake to be
around 5%. Further 3.2%still pledged.
Satyam-Upaid casehearing over the
Maytas deal in Texas
court on January 8.
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05Jan
06Jan
26 Jan2009
SEBI considers
proposal to make itmandatory forpromoters andmajority share
holders to disclosedpledged shares to
stock exchange
Total pledged shares sold byIL&FS reaches 2.5 Cr. in last
13 days. Promoters stakedown to 3.6%. Still a further
1.7% are pledgedPromoters stake inthe company downto 4.5%
Tech Mahindra(Revenues 3766 Cr.)offers to merge with
Satyam (Revenues 8473
Cr.)
The Night Before 7th Jan
Merill Lynch discovers seriousirregularities in books of
accounts and approachesregulator SEBI for further
course of action and its inabilityto investigate further. DSP
submits report to SEBI andSatyam management late night.
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07Jan
26 Jan2009
09:45 A.M.
Satyam Chairman
Ramalinga Raju writes the
following letter to the
company board
ADRs crash 90%
Satyam BSE scrip falls 78%
DSP snaps ties with
satyam.
Auditing firm PWC underscanner
Govt. instructs RoC to
review report
Ram Mynampati takes
over as interim CEO
according to Rajus letter
Hunt for Raju brothers
begin. Amid speculation
over his
whereabouts, Raju is
believed to have left for
the United States in
connection with a court
case.
Satyam stripped of
Golden Peacock award
NSE removes Satyam from its benchmark index Nifty.
It will be replaced by Reliance Capital with effect from
January 12. It will also be removed from various other
indices like CNX 100, S&P CNX 500,CNX IT and the CNX
Services sector index
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08Jan
09Jan
26 Jan2009
Raju brothers arrested by the police on
charges of criminal conspiracy,
cheating, forgery, misappropriation of
funds and criminal breach of trust.
PwC in major
trouble. Stocks of
PwC clients take a
major beating at
the BSE and NSE
BSE to replace Satyam
Computer with Sun
Pharmaceutical in its
benchmark index
Sensex with effect
from January 12.
PwC shot back at Satyam, saying in
a media statement that the auditing
was based on the audit evidence
provided by Satyam and in was
accordance with applicable
standards.
10Jan
CFO Valdamani Srinivas,
who is the financial
custodian of the
company resigns
Market Capitalization of satyam falls to Rs.1,607 Cr from Rs.15,262 Cr. on Dec 16 in
19 trading sessions.
Former CFO
Valdamani Srinivas
remanded to
judicial custody
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13Jan
14Jan
26 Jan2009
The newly appointed 3 member
board appoints auditing firm KPMG
and Delloitte to assist it in cleaning
the mess in the scam taintedcompanys accounts
Government
hands satyam case
to SFIO
Maytas stockshit the lowercircuit for 7th
consecutivetrading session
16Jan
The government expanded the three-
member Satyam board to six to include S
Balakrishnan of Life Insurance Corporation,Tarun Das, chief mentor of the
Confederation of Indian Industry and T N
Manoharan, former president of the
Institute of Chartered Accountants of India
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Why on 7th Jan 2009?
DSP Merrill Lynch informed SEBI about
Material irregularities in Accounts on 6th Jan
Minutes of Meeting of 16th
December,2008were not submitted to RoC-(This created somedoubts)
Hearing of Upaid- satyam case on 8th Jan at theUS court
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Raju ban gaya conmanHow?
Proposing High risk Maytas acquisition
Overvaluing the proposed acquisition
Promoter pledging their holdings (decrease in
holding)
Refusing to resign
Fudging Income statement
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Fabricated Income Statements
Creative Account Practice
Details of cash balances with Scheduled banks are not there in theAnnual report
Question raised by Equity analyst Kawaljeet Saluja -$500 mn cashparked 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 LiabilitiesFraud Amount
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Stake decreased from 21.6% to 3.6%
Money raised through 4 Front run Co. by
offloading pledged shares.
0 50 100 150 200
Bangar Agro
Amravati Greenlands
Narayandri Greenfields
Harangi Agro
Amount (In Rs. Cr)
Amount (In Rs. Cr)
Share Pledging
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Fake FD receipts and Employee Nos.??
Take FDreceipt
Tell to BanksFD receipt is
Lost
Ask forDuplicate
Receipts
Use the Duplicateto Withdraw
money
Park theMoney
in otherBank
At the endshow the
original FD
receipts
The moneyhas already
vanished
Repeat theprocedure
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Satyam-Maytas Nexus Contd..
Cash raised & siphoned off funds used to buy
several thousands of acres of land across AP
through several benami accounts
Helped Maytas in getting major contracts
Question raised regarding
Hyderabad Metro Project being allocated to
Maytas Infra.
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The Inside News
Satyam's CFO Srinivas Wadlamani has sold around
8,00,000 shares & even Satyam's interim CEO,
Maynampati has sold 4,00,000 shares in past 6
months above Rs 300 per share. Satyams top 40 officials collectively sold shares
worth more than Rs 300 crores in the past 6 months
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STOCK CHARTING
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What Happened Then.
CA ministry dissolved the Satyam Board and
announced new members.
3 more members-chief mentor of CII Tarun
Das, ex-president of ICAI T N Manoharan and S
Balkrishna Mainak of LIC
Deepak Parekh
Former HDFC
Chairmam
Kiran Karnik
Former
NASSCOM
Chairmam
C Achutan
Former SEBI
Member
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Tech Mahindra the IT arm of the Mahindra
Group won the bid to buy 31% in Satyam for a
price of Rs.58/- per share.
They renamed the company Mahindra Satyam
and as per the results disclosed for the
quarter ending June 2011,the company is
back on the growth track.
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CREDITS
1) Akash Mehta 33
2) Vidur Suri 55
3) Anurag Asawa 05 4) Rohit Asarpota 04
5) Amit Ahuja 02
6) Hiten Balani 07
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Thankyou