Satyam Tumbles with Scandal

Satyam, the fourth largest IT company of India, is caught in a row of untoward events after the disclosure of financial sham by its chairman, B.Ramalinga Raju. The chairman, confessing to his role in the scandal, which accounted to the tune of $1 bn, resigned from his post .In an attempt to rescue the outsourcing industry of India out of this crisis, the government of India has taken over the reigns of Satyam in its own hand and constituted a three-member board.

The new board includes some of the well known names of the Finance World – Deepak Parekh, HDFC President; C Achutan, former SEBI member and Kiran Karnik, IT expert and former president of NASSCOM. The three veterans will choose the new chairman of Satyam and in due course will decide the future of the company.

Earlier, B. Ramalinga Raju in his letter to the Satyam's board of directors, accepted that he has been inflating the balance sheets of the company for the last several years. He further added “I did not bribed anybody.... I manipulated the accounts for more business”. The balance sheet of Satyam, prepared on March 31, 2008 showed the cash reserve of the company to the accord of several hundred millions whereas the company does not has any cash reserve as of now. The scandal caused deep plunge in the share price of the company which reduced to as low as 22% of the original price on the day of disclosure. The government's intervention and the credibility of new board members has instilled some faith in investors as well as associates of the company and as a result the share price of the company gained on some points but it will take a very long time before it can catch upto its former position.

B. Ramalinga Raju, his brother Rama Raju and CFO of Satyam – Vadlamani Srinivasan - have been taken into judicial custody and the criminal proceedings have been going on against them as well others suspected to have been involved in this accounting fraud of such a high magnitude.