SATYAM+FINAL by xiangpeng

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									Satyam Analysis...
CONTENTS
   MANAGEMENT
   INTRODUCTION
   HOW ITS HAPPENED
   WHAT WENT WRONG?
   IMPACT ON INDIAN IT INDUSTRY
   INDIA’S STEP TO SAVE SATYAM
   WHO WILL ACQUIRE?
MANAGEMENT




FOUNDER   :   Mr. Raju Ramalinga
CEO       :   Mr. A. S. Murthy
INTRODUCTION
 Satyam was established in 1987.
 4th fastest growing IT company in
  India.
 9 % market share
 40,000 employees
 Revenue $2.1 billion
 It is the first company of India listed
  in three International Exchanges i.e.
  NYSE, DOW and EURONEXT
 HOW IT’S HAPPENED
 Maytas
  Acquisition.
 Investors
  Aborted.
 Board Members
  Resigned.
 On 7th Jan., 09,
  Chairman
  resigned after
Satyam Computer Services Ltd was founded in 1987 by
B.Ramalinga Raju.

The company offers information technology (IT) services
spanning various sectors, and is listed on NSE, BSE, the
New York Stock Exchange and Euronext.


Few milestones:
1987
Incorporated as private limited company in 1987

1991
Recognized as a public limited company; debuts on
the Bombay Stock Exchange (BSE)

IPO oversubscribed by 17 times

1993
Satyam signs joint venture with Dun & Bradstreet for IT
Services

Joint venture with GE announced
1999
Satyam Infoway (Sify) becomes the first Indian
Internet company listed on NASDAQ


Satyam forms joint venture with TRW Inc.

Presence established in 30 countries

2007
Becomes the Official IT Services Provider for the FIFA
World Cups, 2010 (South Africa) and 2014 (Brazil)

Announces acquisition of UK-based Nitor Global
Solutions Limited

Becomes the first Asian company to feature in the
Training Magazine’s list of Top 125 companies for
learning
Satyam Scandal….




 Cooking books of accounts
Ramalinga Raju, chairman
“None of the board members, past or present, had any
   knowledge of the situation in which the company is
   placed.”

He INFLATED (non existent) cash and bank balance of Rs
     5,040 crore(as against Rs 5,361 crore) reflected in the
     books.

AN accrued interest of Rs 376 crore is non-existent.

He has understated liability to the tune of Rs1,230 crore in
    accounts of funds arranged by me.

He hasover-stated debtors position of Rs 490 crore (as
    against Rs 2,651 crore reflected in the books.)

FOR sept 2008, we reported Rs2,700 crore revenue and
   operating margin of Rs 649 crore against actual
   revenue of Rs2,112 crore and margin of Rs 61 crore.
Vadalamani Srinivas, CFO
“I was asked specifically to not look into bank statement”
AUDITOR never pointed out any “deficiencies” during
   their discussions. Fixed deposits were unreal and
   fictitious which were managed with an understanding
   between the audit section and management.

BANK deposit were handled directly by Raju and the CFO
   was specially asked for “not to look into it”

“RAJU and his brother used to take decisions and tell us
   to do as instructed.”

THE CFO admitted that the account were manipulated for
   about seven years.

PRIOR to quarterly board meetings, Ramakrishna,
   VP,finance,would prepare the balance sheet. ”I do
   not pay much attention to the details of that balance
   sheet.”
Scenario I Forgery inc
The scam team forged invoices to show collection
of revenue abroad, forged bank statement to show
inflow of money, showed transfer of money to fixed
deposits (FDs) through forged FD receipts and
reflected all this in the final accounts. The assets
and liabilities are altered Q2Q to reflect rising
income and rig share price.

CAVEAT           This would require matching of
revenue With staff strength and salary cost. Would
also require forging of TDS certificates for income
from FDs.
POSSIBILITY      High, as there is logic and objective.
Scenario II True Lies
Satyam did make money on export. Raju raised
invoices for export abroad; money did come through
the banking channels and was transferred to long
term FDs and reflected in the books. Once the FDs
were recorded in the books the deposits were
dissolved and money transferred to multiple
accounts. The books continued to reflect the FDs as
you don’t need to surrender certificate anymore.
Siphoned money was use to acquire land, property,
pay for political patronage for Maytas Infra and
Maytas properties.
CAVEAT         This again require forging of TDS
certificates for accrued interest and connivance of
auditors.
POSSIBILITY Very high
Scenario III Hawala Inc
Raju receives political slush money abroad,
brings it as invoiced billings, shows it in his book
and transfers it to FDs to be dissolved latter.The
money transferred to multiple accounts is
siphoned to repatriate politicians’ money and for
funding the activities of Maytas.

 CAVEAT       Have to show staff strength to
match revenues or ramp up operating margins.
Besides co-opting auditors and forging TDS
certificates.
POSSIBILITY Very very high, is in sync with
whispers of pressure to pay politicians and
patronage.
      WHAT WENT WRONG?
 Inflated figures for cash and bank
  balances of INR 5,040 cr. (as against
  INR 5,361 crore reflected in the
  books).
 Operating Profit were artificially
  boosted from the actual 61 cr. to 649
  cr.
 Satyam also showed an interest
  earning of
 Rs. 376 cr. that was fictitious.
      IMPACT ON INDIAN IT
          INDUSTRY
 It is surely going to be more difficult
  for other Indian IT service players to
  win business.
 Undoubtedly, this is going to hurt the
  prospects of foreign money flowing
  into India.
 Global perception about indian
  companies.
 Indian stock market slipped over 7%
  on 7th Jan., 09.
               Balance sheet of Satyam computer ltd.

SOURCES OF FUNDS         AS ON      ADJUSTED           ADJUSTMENT
                                                       S
                         30.09.08   BALANCE SHEET
1. Shareholders funds
   a. Share capital
    (share application   134.70     134.70
   money , pending)

  b. Allotment           2.76       2.76

   c. Reserves and       8392.23    (-)415.47
    surplus
2. Loan Funds

 a. secured loans        30.49      30.49

 b. unsecured loans      234.80     1464.80             1230.00
                         ______     _______             _______
                         8794.98    1217.28             1230.00
____________________     _______    _______             ________
 APPLICATION OF FUNDS        AS ON      ADJUSTED BALANCE   ADJUSTMENT
                                                           S
                             30.09.08        SHEET

1.     Fixed assests         1381.10    1381.10            1381.10
2.     Investments           618.64     618.64             618.64
3.     Tax                   118.75     118.75             118.75
4.     Current assests
     a. sundry debtors       2651.36    490.00             2161.36
     b. cash                 5312.62    272.62             5040
     c. accrued interest     376.34     -                  376.34
     d. Loans                502.22     502.22             -

LIABITIES                    2166.05    2166.05            -
Net current assests          6676.49    901.21             5775.21
                                                           (differenc
                                                           e)
                             _______    _________          ________
TOTAL APPLICATION OF FUNDS   8794.98    1217.28            7577.7
Where is the money???
    Questions to the auditors
    1) If the company claims it has cash in its hand that




?
         should be enough signal for the auditors to check
         whether the cash in hand is available or not.

    2) Bank balance has been invested properly or not-
        where all it has been invested –MFs,etc.

    3) Whether the internal control mechanisms are in
        place.

    4) Scrutinizes if the company has huge creditors and
        balance at the same time.

    5) Look into why the company is not taking benefits
        and negotiating the price.
    cont……


?
    6) Are the profit margin abnormal compare to industry
        norms?

    7) Check if there has been a quantum jump in wealth.

    8) Carry out an overall ratio analysis of the figures in
        the organization, previous year, similar industry.

    9) Physical verification of assets owned by the
        company.
New board of director formation by
company low board and Ministry of
company affaires

   Deepak S. Parekh
    Executive Chairman HDFC group

   Kiran Karnik
    president of Nasscom

   C. Achuthan
    former presiding officer of the Securities Appellate
    Tribunal

   Tarun Das
    Former president CII

   T.N. Manoharan

   S.B. Mainak
        Bidders for Acquisition
 Spice group

 Tech Mahindra

 Hinduja group

 L&T

 GE
Finally Satyam acquired by tech
mahindra….

								
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