Satyam Computer Services got
exposed in 21 days. On December 16, Satyam broke the news of Maytas buyout. The
acquisition eventually did not go through as it was severy opposed by the
shareholders. A series of resigations from the Satyam board took place
subesequently. The final blow came on January 7, when Satyam's promoter
Ramalinga Raju wrote a letter to the board saying that Satyam's balance
sheet was forged. The balance sheet showed inflated cash & bank
balance of Rs 5040 crore. The accrued interest of Rs 376 crore in the books too
was non-existent.
In the Q2 of FY09, reported revenues
was to the Rs 2700 crore Vs actual revenue of Rs 2112 crore. The Q2FY09
operating margin reported was Rs 649 crore against Rs 61 crore. The Q2FY09
numbers had Rs 588 crore of artificial cash in books.
Here's a recap of what
happened in the past 21 days.
December 16: Software major Satyam decided to buy
Maytas Properties for USD 1.3 billion & 51% stake in Maytas Infra for USD
0.3 billion. Satyam's ADR plunged 55%
December 17: Satyam called off the deal; stock was
down 30%, Maytas locked at 20% down circuit
December 18: Satyam announced Board meeting on
December 29 to consider buyback
December 19: Post Maytas U-turn, Upaid filed
motion against Satyam for USD 1.1 billion. Earlier in
October, Satyam had filed a case against Upaid alleging it of ‘business
disparagement’
December 23: World Bank admitted to put a ban on
Satyam for data theft
December 25: Mangalam Srinivasan, Non-executive
and independent Director resigned
December 26: Maytas ended its downward journey of
six consecutive circuits
December 28: Prof. Krishna G Palepu, Non-executive
Director and Mr. Vinod K Dham, Non-executive and independent Director of the
company resigned
December 29: Satyam Board meeting postponed to
January 10
January 3: A sale of pledged shares by lenders
of the Ramalinga Raju family led to the family's stake in Satyam falling to
4.4% from 8.27%
January 6: Satyam clarified news item of merger
with Tech Mahindra; ILFS announced sale of 2.45 crore equity shares of Satyam
January 7: Mr. B Rama Raju, Managing Director,
admitted fraud; resigned; Satyam books inflated of Rs 5040 crore; DSP Merrill
Lynch terminated its engagement with the company. Satyam down 78%
In this period, Satyam has
lost market cap from Rs 15183 crore to Rs 2662 crore, a fall of 82%. It has
certainly raised questions on corporate governance standards of Indian
companies. If one looks at the whole scenario, then it is clearly visible that
Satyam never had cash of USD 1 billion. By buying Maytas, Raju wanted to
transfer company’s dummy entry of cash reserves from Satyam’s book to Maytas
balance sheet. However, strong opposition evident from its ADR fall forced Raju
to take a U-turrn and then the stock started falling like a pack of cards. Raju
revealed that balance sheet figures were manipulated for the last six quarters.
It is indeed a sad day for the Indian markets. Satyam’s historic journey ends
on a tragic note.
