Daijiworld Media Network - Hyderabad (SP)
Hyderabad, Jan 7: Already facing flak for earning the wrath of the World Bank that has banned its association with Satyam Computers for eight years for illegally accessing information and reeling under a scathing attack launched by the investors and employees alike over the $1.6 billion acquisition bid of firms promoted by his family members which prominently deal with real estates, Satyam Computer Services chairman B Ramalinga Raju resigned on Wednesday January 7. Admitting to the wrongs he had done in the past, he said he would offer himself to be tried under the laws of the land. His brother and company managing director B Rama Raju too followed suit and resigned from his post. The corporate world expects more skeletons to tumble out of Satyam's cupboard and the fraud is stated to be one of the biggest in the corporate world.
In a letter addressed to the members of the Board of Directors, Raju has revealed, that the balance sheet figures of the company were inflated over the years to show that the company has been doing well. The cash figure is inflated by as much as Rs 5,040 crore while the accrued interest has been shown as Rs 376 crore as at September 2008, both of which are non-existent, he has confessed. Further, the company also has an under-stated liability of Rs 1,230 crore, all of which went on to paint a rosy picture of the company before the world and its investors, who are in for a shock now.
Raju further said, that the balance sheet shows inflated debt of Rs 2,651 crore instead of Rs 2,061 crore. The revenues of the company shown in balance sheets over the years were grossly inflated, and the effort to take over Maytas Inferastructure and Maytas Properties that were promoted by his son, were made to bring in fictious assets to fill the gap. Raju admitted, that all efforts made to eliminate the yawning gap in the balance sheets have failed. "Once manipulations started happening, I could not control them thereafter," he confessed, clarifying that no other board member was aware of the goings on.
It is clear that the chairman was anxious to show inflated profits of the company over the years, to show its competency. The board meeting was to take place on January 10 and the confession that has come in at a time when the company is going through a difficult phase, is sure to send its share prices tumbling. Not only this, the tremors of the impact are almost sure to be felt in other IT majors of the country too. The resignations by two of the pillars of the company have created a crisis and therefore, the board of the company is facing a restructuring process.
Ramalinga Raju however, said that he would continue to be the chairman of the company till the board is expanded at the earliest possible.
The development has sent shock waves all around, and raised questions on the corporate governance policies of Indian companies and efficancy of the accountancy standards. The company accounts get thoroughly audited by reputed auditors and then go before the audit committee before being approved. Without the connivance of all these, large scale manipulations seem impossible.
There is one more fear. The foreign countries, which are already facing the heat of the global melt down, may grow wary of the financial status of the Indian companies they deal with and develop cold feet on having further dealings with them. The companies abroad heavily lean on the financial standings as spelt out in the company balance sheets, to assess the reliability and desireability of having dealings with these entities.
After the above shocking revelation, shares of the company fell to a record low of Rs 49.50 per share, as against a high of Rs 544 and low of Rs 114 during the previous half year. The employees of the company are a worried lot, and fearing of losing their jobs sooner or later. The company is likely to organize a press conference within a day.