SATYAM SCANDAL

Satyam Computer Services was founded by Raju Ramalinga Raju in 1987.The company offered consulting and I.T services spanning various sectors of the economy and was listed on the NATIONAL STOCK EXCHANGE, BOMBAY STOCK EXCHANGE and NEW YORK STOCK EXCHANGE.It was one of India’s biggest I.T companies and had received the World Council for Corporate Governance’s Golden Peacock Award twice for its excellent performance in corporate governance and risk management.It was one of the most trusted companies of India but the scandal of Satyam shocked the whole nation and it’s brand value decreased in the share market after this episode.

On January 7,2009 Raju resigned as the chairman and confessed the fraud that was happening in the company from past so many years by hampering the accounts of the company. Raju revealed  that Satyam’s profits were inflated over many years  and the assets of the company were overstated as compared to the reality. He took the whole responsibility of the act. Raju stated that Satyam’s balance sheet included $1.5 billion in non existent cash and bank balances. The company also understated it’s liabilities. After this confession a shock wave emanated in the stock market and the share price of Satyam fell to an all time low of rupees 40 as compared to rupees 178.95, destroying crores of investor’s wealth in a single day.

On January 9,2009 the Andhra police arrested Raju and two others, his brother and the Managing Director of the Satyam. On January 24 two partners of Pricewaterhouse Coopers were detained for tampering the accounts of the company.It was in April 2009 that Mahindra group acquired Satyam Computers and renamed it as Mahindra Satyam.

I would like to share an experience of one of my family member who purchased Sayam’s share at an all time high of rupees 219. After the announcement of the fraud the share price fell at rupees 10. He ultimately sold the share at rupees 90 incurring huge losses. A similar story happened with almost all the investors of this company.It was after the incident of Satyam that corporate governance gained so much importance in Indian Market.

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