What happened to Satyam?
Satyam Computers, the fourth largest IT industry of India, The member of Nifty 50, BSE Sensex, winner of golden peacock award for best corporate governance, and many more laurels that it has in its kitty did not stop it from drowning like a rock in its dirty waters. Ramalinga Raju of Satyam computers, confessed in a four page letter, stating that the accounting books of Satyam had been hugely inflated and that the company did not have that much of money as it was showing. In layman's terms, the company had been from that time lying about the amount of money that they had. Imagine a person telling you he has Rs 10000 but in reality has only Rs 50. Only that the proportion was so high that it took many down with it. This is done in business so that the reputation of the company maintains in business circles, the company keeps getting clients because of its strong liquidity position and investors keep pumping money into the company, to earn more money. Only that all of this was based on pure lies.
Ramalinga Raju claims that he did not take any personal advatange and there was no money laundering. A few days back Ramalinga Raju, decided to buy his sons contruction company MAytas infras for around 1 Billion $ so as to plug the hole between the actual company finances and the projected finances. We can only imagine in his mind. The best guess is, he would have deffered payment to Maytas, and then would have shown the gap as the money involved in paying Maytas Infra. But the deal could not go through, the whole fiasco was brought out in the open and Satyam fell. About the name Satyam means Truth in Sanskit, and it was actually the opposite that Raju was doing.
4 of the directors resigned, bringing bad name to them as they all were closely associated with the whole Satyam Gate. Price Water House Coopers, Satyam Computer's audit company has fell in its shadow. The question that are being raised by many in the accounting circles is why PWC not able to smell the rat, which DSP merill Lynch was able to do it in a few days. Now even Merill Lynch has terminated its egagement with Satyam as consultants.
The last question that is there on many people's mind is why now, Raju confessed. It is said that Merill Lynch played an important role in the confession and advised(forced) him to do a confession. on the other hand PWC was not able to do so in so many years. PWC i doubt would be able to rise from this shadow of Satyam computers and processes are going on to black list the audit firm.
Lastly the employees of Satyam have already put up themselves on job portal, and there is not indication as to when the company can keep on going. Infosys Technologies has directed its HR not to employ anybody from Satyam computers, AS many would try to jump the sinking ship. This is not wrong, on part of Infosys, as it is trying to show support to Satyam and keep its employee in position. There have been talks of another company taking over Satyam and solving it of its debacle. Tech Mahindra and LnT Infotech are the biggest contendors for the takeover. But for now every body is waiting and watching for its legal implications. Many other IT firms, Though have shown interest in hiring employees of Satyam.
There have been rumours that Raju has left the country. But Economic Times has reported today that he is still in Hyderabad. THis is what his lawyer also says. Meanwhile advertisement shows that Satyam has been removed from Nifty 50 and Sensex. Clients are pulling off from the company and the whole company os moving towards a gloomy fututre, until another light in shining armour comes and saves its employees (LnT Infotech and Tech Mahindra). This will, I am sure be forced by the Indian Government who not want a company like Satyam be washed away completely.
There are many other aspects that are being discussed like giving it new laws, but as was published in the Times of India edit, there are no lacks of law but a lack of implementation. There is also talks of taking legal actions against Satyam in USA as it is listed in NYSE. This will not be less than Enron, and Raju can face a prison term of around 100 years there. In India, if he confesses in court and becomes a facilitator he can be set for a small fine(of about 25 crore, much smaller than the scam amount), or a small imprisonment.
