Satyam by kdgsap2004

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									Satyam Scams
   Presented By

 KISHORE GULHANE
             How I will go about…
Introduction to Satyam and Maytas


Opening of the Scam (Series of events)


Financial Implication, Fabricated income statements, Maytas
Valuation, Satyam-Maytas Nexus, Fake FD receipts cycle.
Stock Charting - Satyam and Maytas,


Role of Auditors


Satyam In the News…
         SATYAM
• Set up in the year 1987 to provide    First IT Company in the World
  services in IT sector                Certified under ISO9001:2000
                                        Ranked Among India’s Top 10
• India’s 4th biggest software
                                       Best Employers, 2004 and 2003
  company in India                      Top 13 Best-Managed Companies
• It is listed in BSE, NSE, NYSE and   in India
                                        Winner, Corporate Citizen I
  Euronext (Amsterdam).                award for Corporate Social
• BSE IPO oversubscribed 17 times      Responsibility
                                        SAP Pinnacle Award 2008
  when made public in 1991              Satyam Wins golden peacock
• The company employs 53,000 IT        award for excellence in Corporate
                                       Governance on Global level for 2nd
  professionals across development     time
  centers in 6 continents               United Kingdom Trade and
                                       Investment India Business Award for
                                       Corporate Social Responsibility
> Chairman and founder Satyam
Computers Services Limited
> MBA from Ohio University
> IT man of the year award by Data Quest
in 2002
> Winner of Ernst & Young entrepreneur
of the year award in 2007
                                                       B. Ramalinga Raju
                                                   Founder & Chairman, Satyam
                                                         Computers Ltd.


                                           > He became the Managing Director and
                                           Chief Executive Officer in 1991
                                           > Mr. Rama Raju holds a Master of
                                           Economics degree from Loyola College,
                                           Chennai and a MBA degree from Loredo
                                           State University, Texas
                                           > Before 1997, he was with Maytas Infra
                                           Limited as one of its Directors
             B. Rama Raju
  Promoter & CEO, Satyam Computers
                  Ltd.
  Satyam Clients

  A total of 650+ Clients
185 of the top fortune 500
        Companies
                          Satyam Board Structure
                                              Other
                B.Rama Raju                                              B.Ramalinga Raju
              Promoter & CEO
                                           Independent
                                                                            Promoter &
                                             Directors                       Chairman


 Ram Mynampati                                                                            Srinivas
   Whole time                                                                         Vadlamani Chief
Executive Director                                                                    Financial Officer



    Dr M.
  Srinivasan         Prof. Krishna    Mr. Vinod K          Prof. M      Mr. T R             Prof. V S
                     G Palepu         Dham               Rammohan       Prasad              Raju
                                                             Rao




     GTB/Dr.             Sasken Communication/            ISB Dean/
     Reddy’s             Hellsoft /Montalvo Systems       Bharat            Former CabinetSecretary
   Laboratories          and Newpath                      electronics       /GMR Infra/ GVK Taj
   Satyam – Share holding Pattern

                                         Institutional & Non-
                                      Institutional Shareholders

                                      LIC                4.34%
                                      L&T                4%
                                      Lazard
                                      Aberdeen           13.16%
                                      Fidelity
                                      ICICI Prudential
                                      Citigroup
                                      JP Morgan
Total Market capitalization was Rs.
              15,262 Cr
       (still Dec 16, 2008 )
Satyam Decade at a Glance
                   Maytas
                                          Mr. Teja Raju(VC)
• The Raju’s hold 36.64 per cent while
  institutional holding is 10.92 per cent
• The company had raised Rs 327.45 crore
  through IPO.
• It had a turnover of Rs 1,660 crore and net
  profit of Rs 100 crore in financial year 2008-
  2009.
• Satyam planned to acquire 51 per cent stake
  for Rs 1, 440 crore or $0.3 billion
            Maytas Properties
                                          B. Rama Raju Jr. (VC)

• Raju’s family owns 35% of Maytas properties
• Founded in 2005, it has a land bank of 6,800
  acres
• It was having clearances for three IT SEZs based
  on 148 acres
• An undisclosed stake is held by Infinite India
  Investment Management, a realty fund jointly
  promoted by JM Financial and US-based SRM
  Investments, which invested Rs 600 crore in
  February
So, How did it all begun?
  21 April                                                                       26 Jan
   2008                                                                           2009


             22 Sep
2006
              2008




                                                 Satyam receives the Golden
                                               Peacock Award for excellence in
                      Satyam becomes first    Corporate Governance from World
                       Indian company to                  council
                      publish International
                       Financial Reporting
         Satyam          Standards (IFRS)
        revenues        audited financials
         cross $1
          Billion
16 Dec     17 Dec                                                        26 Jan
 2008       2008                                                          2009




   Satyam gets board
      approval for        Satyam backs out of
   controlling stake in   Maytas deal citing
  Maytas Infrastructure   investors protest
      and Maytas
   properties as fully    Major Clients of
  owned subsidiary for    Satyam express
  $1.6B (Rs. 8000 Cr.)    dissatisfaction.
                          Contracts worth
                          $200 million up for
                          grabs


                          Satyam shares plunge     Board meeting to be
                          55 percent in NYSE.      held on Dec 29 for
                          BSE share plunges over   proposed buyback of
                          30%                      shares
        19    20 23                                                              206Jan
        Dec   Dec Dec                                                             2009




              British mobile solution       World Bank bans Satyam for 8 years
          provider Upaid files a law suit    due to inappropriate payments to
            against Satyam in a district        staff and inability to provide
           Court in the US over Maytas        information sought on invoices
            deal. May face $1 Billion in
                      penalties


Centre refers
Satyam deal
to Registrar of
Companies
(RoC)
                    26 28 29                                                               26 Jan
                    Dec Dec Dec                                                             2009



                                                         3 more Independent Directors resign.
                                                          Mendu Rammohan Rao, Krishna G
                           Board meet initially              Palepu and Vinod K Dham
                           scheduled for 29th
                            postponed to 10th
1st independent                 January
   director Dr.
   Mangalam                Board announces
   Srinivasan               exploring option       Satyam asks DSP          Rumors in market
  resigns from               for buyback of         to review board          about strategic
 Satyam board              shares to restore            structure           takeover by IBM,
                                 investor                                      Accenture
 Satyam objects                confidence
  to world bank                                              IL&FS sells 44.1 lakh shares
   statements,           Promoters disclose that their        pledged shares of Satyam
     asks to               entire holding in Satyam                promoters in 1 day.
   apologies or           pledged with institutional
face legal action
                                                               Promoters equity reduced
                             lenders since 2006                 from 8.6% to aprrox 7%
                    30 02 03                                         26 Jan
                    Dec Jan Jan                                       2009




       Post                                 Satyam board confirms
 cancellation of                             promoters stake to be
  deal, Maytas                             around 5%. Further 3.2%
                        IL&FS sells              still pledged.
looks for raising
                    further 44.27 Lakh
   $500 million
                      pledged shares
 through sale of
                     taking the tally to
   equities and
                     1.5 crore pledged
    properties
                           shares


                    Satyam-Upaid case
                     hearing over the
                    Maytas deal in Texas
                    court on January 8.
                          05 06                                                 26 Jan
                         Jan Jan                                                 2009




                                                                 Tech Mahindra
                       Total pledged shares sold by          (Revenues 3766 Cr.)
                       IL&FS reaches 2.5 Cr. in last          offers to merge with
                         13 days. Promoters stake           Satyam (Revenues 8473
 Promoters stake in     down to 3.6%. Still a further                  Cr.)
 the company down            1.7% are pledged
       to 4.5%

                           The Night Before 7th Jan
  SEBI considers
proposal to make it     Merill Lynch discovers serious
   mandatory for           irregularities in books of
   promoters and          accounts and approaches
   majority share         regulator SEBI for further
holders to disclosed   course of action and its inability
 pledged shares to       to investigate further. DSP
  stock exchange         submits report to SEBI and
                       Satyam management late night.
                              07                                                  26 Jan
                             Jan                                                   2009




        09:45 A.M.                                       Hunt for Raju brothers
                               ADR’s crash 90%
    Satyam Chairman                                     begin. Amid speculation
                          Satyam BSE scrip falls 78%
  Ramalinga Raju wrote                                          over his
  letter to the company                                  whereabouts, Raju is
           board             DSP snaps ties with        believed to have left for
                                  satyam.                 the United States in
                                                        connection with a court
                                                                  case.
Auditing firm PWC under    Ram Mynampati takes
        scanner             over as interim CEO         Satyam stripped of Golden
                          according to Raju’s letter         Peacock award


 Govt. instructs RoC to
    review report            NSE removes Satyam from its benchmark index Nifty.
                                          08 09      10                                   26 Jan
                                         Jan Jan    Jan                                    2009




                           BSE to replace Satyam
    PwC in major
                             Computer with Sun                    Former CFO
 trouble. Stocks of
                            Pharmaceutical in its              Valdamani Srinivas
 PwC clients take a
                              benchmark index                 remanded to judicial
  major beating at
                          Sensex with effect from                   custody
  the BSE and NSE
                                January 12.

     CFO Valdamani                              Raju brothers arrested by the police on
   Srinivas, who is the                             charges of criminal conspiracy,
 financial custodian of                         cheating, forgery, misappropriation of
 the company resigns                              funds and criminal breach of trust.

 PwC shot back at Satyam, saying in
a media statement that the auditing
  was based on the audit evidence           Market Capitalization of satyam falls to Rs.
   provided by Satyam and in was            1,607 Cr from Rs.15,262 Cr. on Dec 16 in
     accordance with applicable                        19 trading sessions.
            standards.
                                                13 14 15 16                            26 Jan
                                               Jan Jan Jan Jan                          2009




  Government
hands satyam case                                   23 year old           Maytas stocks
     to SFIO                                       employee of             hit the lower
                                                 satyam commits            circuit for 7th
                                                suicide in Chennai         consecutive
                                                                         trading session

 The newly appointed 3 member
board appoints auditing firm KPMG           The government expanded the three-
and Delloitte to assist it in cleaning    member Satyam board to six to include S
   the mess in the scam tainted          Balakrishnan of Life Insurance Corporation,
       company’s accounts                       Tarun Das, chief mentor of the
                                          Confederation of Indian Industry and T N
                                             Manoharan, former president of the
                                         Institute of Chartered Accountants of India
          Why on 7th Jan 2009?
• DSP Merrill Lynch informed SEBI about
  Material irregularities in Accounts on 6th Jan

• Minutes of Meeting of 16th December,2008
  were not submitted to RoC-(This created some
  doubts)

• Hearing of Upaid- satyam case on 8th Jan at the
  US court
  Raju ban gaya conman……How?
• Proposing High risk Maytas acquisition
• Overvaluing the proposed acquisition
• Promoter pledging their holdings   (decrease in
  holding)

• Refusing to resign
• Fudging Income statement
             Maytas Acquisition
• Valuation of Maytas duo was done at $1.6 bn
  as against actual $ 225 mn

• Violation of Section 372A of the Companies act
                                   Rs.1,281.8 Cr

                                   Rs. 2,163.7 Cr

                                   Rs.7,920 Cr
       Fabricated Income Statements
               ‘Creative Account Practice’




• Details of cash balances with Scheduled banks are not there in the
  Annual report

• Question raised by Equity analyst Kawaljeet Saluja -$500 mn cash
  parked in current account
5,040 + 376 +          Rs. 1,230 Cr
                                             Rs. 7,136
 470 (Rs. Cr)                                    Cr
                   Understated Liabilities
                                             Fraud Amount
Overstated cash
balances, Income
receivables
       Why and How ????
Investment in Real estate
(Land Banks)


    To keep EPS high
       Sold his stake at inflated price
       (Made Rs.2,065 cr from shares)
                      Share Pledging

• Stake decreased from 21.6% to 3.6%
• Money raised through 4 Front run Co. by
  offloading pledged shares (under
  investigation)
                                  Amount (In Rs. Cr)

              Harangi Agro
     Narayandri Greenfields
      Amravati Greenlands                                    Amount (In Rs. Cr)

               Bangar Agro

                              0    50    100   150     200
Fake FD receipts and Employee Nos.??

                               Take FD
                               receipt
         The money                          Tell to Banks
         has already                        FD receipt is
          vanished                               Lost



    At the end
     show the                                      Ask for
    original FD                                   Duplicate
      receipts               Repeat the           Receipts
                             procedure
                  Park the
                   Money           Use the Duplicate
                  in other           to Withdraw
                    Bank                money
Parallel Finance Department ???
  Satyam-Maytas Nexus Contd…..
• Cash raised & siphoned off funds used to buy
  several thousands of acres of land across AP
  through several benami accounts

• Helped Maytas in getting major contract
STOCK CHARTING
Comparison – Satyam and Maytas share prices
              The Inside News
• Satyam's CFO Srinivas Wadlamani has sold around
  8,00,000 shares & even Satyam's interim CEO,
  Maynampati has sold 4,00,000 shares in past 6
  months above Rs 300 per share.
• Satyam’s top 40 officials collectively sold shares
  worth more than Rs 300 crores in the past 6 months
Role of Auditor


• According to law there should be an external
  and an internal auditor(can be outsourced)
• Job is to check whether processes are being
  followed and are accurate and adequate
• One of the key audit test is to validate firm’s
  cash and bank balances(what was PwC doing)
In the News..
Thankyou

								
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