Satyam Case Study

Topics: Mahindra Group, Software companies of India, Companies listed on the Bombay Stock Exchange Pages: 2 (502 words) Published: August 25, 2013
Ethics Case Satyam Computer Services – The Enron of India

Founded in 1987, Satyam Computer Services Ltd. was founded by B. Ramalinga Raju. Operating globally in 66 countries, Satyam had a growth of 53,000 employees from just 200 employees. By 2009, it was India’s fourth largest information technology company. Services included customer service and outsourcing of accounting and finance. 185 companies of those listed, as the Fortune 500 including Nestle, General Motors and General Electric were all provided services by Satyam.

Mr Raju announced a $1.6 billion bid for two Maytas companies operated by his sons, saying he wanted to deploy the cash available for the benefit of investors. The pressure given by investors and the market forced him to retreat his proposal within hours.

January 7 2009, Mr Raju resigned from Satyam with a letter stating his fraudulent behaviour. He systematically falsified Satyam’s financial reports to gain shares for his mother and younger brother. Small discrepancies grew over time to unimaginable portions ending in millions and billions of rupees overstated. Raju was siphoning approximately $4 million a month from the company by having 13,000 fictitious employees. Observers predicted that the Satyam case would cause harm to India’s credibility and reliability in IT services. World Bank also banned Satyam after employees hacked into the system and accessed sensitive information. Investment banker DSP Merrill Lynch terminated its services with Satyam after learning of the scam. Finally, Ramalinga Raju announced confession of over Rs. 7800 crore financial fraud as he resigned as chairman of Satyam. Later revealing in his letter that his attempt to buy the two Maytas companies was his last attempt to “fill fictitious assets with real ones”, Admitting “It was like riding a tiger without knowing how to get off without being eaten”.

Satyam ADRs lost 50% of their value overnight. Satyam became a takeover target. Prior to the...
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