Satyam Computer Services founder-chairman B Ramalinga Raju has resigned from the IT major's board after admitting a multi-crore fraud in the company’s accounts. The scent of a scam has been in the air since mid-December last year when Satyam's bid to buy the family-owned Maytas Properties and Infrastructure failed.
In the regulatory statement, Raju said that the company had fraudulently incorporated a non-existent cash component and inflated the bank balance to reflect Rs 5,040 crore (Rs 50.4 billion) as against Rs 5,361 crores (Rs 53.61 billion).
''No board member had any knowledge of the real situation. Accrued interest of Rs 376 crore in books is non-existent. About Rs 1,230 crore was arranged to Satyam, but was not reflected in the books,” he said.
Reports say that the account manipulation started years ago. "It was like riding a tiger, not knowing how to get off without being eaten," Raju said in his resignation letter to the company’s board of directors, in which he listed major financial wrong-doings over the years to inflate profits.
"I sincerely apologise to all Satyamites and stakeholders, who have made Satyam a special organisation, for the current situation," said Raju. "I am now prepared to subject myself to the laws of the land and face consequences thereof."
Shares of the company plunged by over 40 per cent soon after the resignations. Satyam, considered a ripe proposition for acquisition, was pushed into crisis after Raju was forced to abandon the acquisition of Maytas Infrastructure and Maytas Properties promoted by his son. (MAYTAS, thats SATYAM spelt in the reverse order).
Satyam is the country's fourth largest IT firm and has over 51,000 employees.
Here is the chain of events leading up to Wednesday's admission.
December 16, 2008: Satyam Computers announces it is buying 100 per cent stake in two companies owned by Chairman Ramalinga Raju's sons - Maytas Properties and Maytas Infra. The $1.6 billion dollar deal comes in for severe criticism from investors and analysts, dubbed one of the worst corporate governance events in India.
December 17, 2008: Under pressure Satyam does a U-turn and 12 hours later, the deal is off.At that time, Ramalinga Raju said, "I would like to make this clear to every one that reason we are calling off the deal is totally on account of he fact that the reaction of the sum off the investors to the diversification has not been favourable and that is the whole reason." But the damage was already done. The company's shares were pounded on the bourses and it lost $2 billion on the New York Stock Exchange.
December 23, 2008: The World Bank confirms it has banned Satyam for eight years for bribery and data theft.
December 26, 2008: The Maytas deal takes its first toll - independent director Mangalam Srinivasan resigns.
December 29, 2008: Three more independent directors resign.
- M Rammohan Rao, Dean of ISB, the man who chaired the board meeting which cleared the controversial Maytas deal.
- Pentium chip inventor Vinod Dham.
- Krishna Paleppu.
The company's board meeting is defered to December 10.
January 7, 2009: Ramalinga Raju resigns, admits to fraud. He says the company's cash and bank balance sheet has been inflated and fudged to the tune of Rs 5,040 crore.
But the major question arises is that "Where is B Ramalinga Raju?" Everyone is trying to find an answer to the question after the chairman of Satyam Computers resigned on Wednesday confessing to a Rs 7,000 crore fraud.
A team of officials from market regulator Securities and Exchange Board of India (SEBI) will arrive in Hyderabad on Thursday to begin a probe amid speculation that police might arrest Raju, but nobody knows his whereabouts.
Raju became incommunicado after sending a letter to the Satyam Board of Directors on Wednesday morning. There was utter confusion after a TV channel reported that he had left either for the US or Dubai. Raju is believed to have met nobody in the last two days. It is also possible that he might have handed over his letter to company officials before becoming incommunicado. The Hyderabad police were also reportedly trying to find the whereabouts of Raju. Some police teams were also sent to Satyam offices in the city to find Raju's whereabouts but they were unsuccessful in tracing him as well.
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