SCAMSTERS INC.

Satyam might be facing the heat right but the Satyam saga has clearly dealt a blow to the Indian IT dream.

The IT industry represents modern India. They are the ones who have created brand ‘India’ on Wall Street.

But Raju's fraud might change the Indian IT dream forever.
After all, the fourth largest Indian IT company, Satyam has fallen off the cliff, in what unfolds as the most dramatic frauds of recent times.

Now, the clients would think twice before engaging with an Indian IT vendor.
The reason is simple—they would ponder over whether the law of the land can be trusted anymore.

However, Narayan Murthy, the founder of Infosys, said "One apple is bad doesn’t meant everyone is bad."

Well, even as Murthy calls it a one off case, Infosys has already started promising more disclosures to its investors and whatever it takes to keep the clients’ trust.

Also, industry body Nasscom has swung in action, asking companies to switch to the top gear so as to retain their clients.

Som Mittal, President of Nasscom, said,"We are asking companies to make more disclosures on governance issues to their clients."

It’s certainly going to be tough ride for the Indian outsourcing industry with the recessionary pressure of the west on one hand and now, an image crisis.
Meanwhile, the international biggies like IBM and HP will benefit directly, unless the industry leaders go all out to defend their credibility.

Source: NDTV Profit

The ice is broken. The chairman of a company that was considered one of the torchbearers of India’s new economy has confessed to one of the country’s biggest corporate frauds. Satyam is the company and Ramalinga Raju the chairman, who has now resigned from his post following the revelation of a fraud that might even give scamsters like Bernand Madoff and Charles Ponzi a run for their money.

Satyam’s last month’s gaffe of transferring funds to promoter group companies by buying stakes in the latter already raised a stink. It led us to doubt the faith that investors had put on a company’s management, its independent directors, auditors, consultants and rating agencies. Simply put, it shook the entire chain of belief that investors had on these parties.

Mr. Raju's confession has put nail in the coffin. What is even more glaring is his statement saying that that Rs 50 bn (or 94% of total) cash on Satyam’s books is non-existent, fake!

In his confession statement, Mr. Raju says - "Every attempt to eliminate the (balance sheet) gap failed. As the promoters held a small percentage of equity, the concern was that poor performance would result in a takeover, thereby exposing the gap. It was like riding a tiger, not knowing how to get off without being eaten."

Well, Mr. Raju still survives after getting off this tiger! Every other investor has been eaten. And so have the 50,000 employees of the company who must be wondering where they have been brought into. After all, employment with Satyam might not anymore be an added advantage on their CVs.

He has also admitted that the Maytas deal was "the last attempt to fill the fictitious assets with real ones." He goes on to say, "Once Satyam’s problem was solved, it was hoped that Maytas’ payments can be delayed."

This man has put the whole India growth story at risk by indulging in this fraud. And he is not alone in this. This also brings to light the loopholes in the evaluation systems that boards, auditors, credit rating agencies and bankers apply to judge companies. The role of companies must be to find creative and productive ways to help build societies of confident and independent investors and citizens. Frauds like Satyam and its chairman is definitely not what we want.

For our subscribers, we are holding back our view on Satyam till further clarity regarding its future emerges.

Source: EquityMaster

The government on Friday dissolved the board of Satyam Computer Services and said it would appoint new directors as it sought to limit the fall out from India's biggest corporate scandal in memory.

Satyam chairman Ramalinga Raju, who resigned on Wednesday after revealing years of accounting fraud, which has called into question the future of the outsourcing company, will appear before the market regulator on Saturday.

Corporate Affairs Minister Prem Chand Gupta said the government would appoint 10 new members to the Satyam board, which would then meet within seven days. He said there was no move to take over Satyam's management as of now.

"The government is considering appointment of suitable persons as directors of Satyam," Gupta told a news conference in New Delhi. "We are determined to reach the truth but are equally concerned with the fate of employees and other stakeholders."

A Satyam spokeswoman said a statement from the company on the developments was expected later on Friday.

In a bid to ease the worries of rattled investors, the regulator, the Securities and Exchange Board of India, said auditors' certification of corporate results from the December quarter would be peer reviewed.

The government barred Satyam's board from holding its scheduled meeting on Saturday, which was called to consider likely options such as inviting a takeover or strategic investor and appointing an investment banker.

Analysts said Satyam's very existence was threatened by the scandal, which stand-in Chief Executive Ram Mynampati said has pushed the company into a crisis of unimaginable proportions.

Satyam shares slumped to 11.50 rupees (24 U.S. cents), their lowest since March 1998 and a far cry from a 2008 high of 544 rupees, before ending down 40 percent at 23.85 rupees ahead of the board's dissolution.

The company's market value has shrivelled to $330 million, from more than $7 billion just six months ago.

FICTITIOUS CASH

The chief financial officer has also offered to resign after Raju's admission that profit had been overstated for years and that about $1 billion, or 94 percent of the cash and bank balances on Satyam's books at end-September, did not exist.

"There's a big question mark over everything. We don't know what kind of business model they have now," said Amar Ambani, vice-president of research at broker India Infoline.

"Raju's declaration says that at the operating level the margin was 3 percent, so at the net level it must have been a loss, which makes it extremely unviable. They have been borrowing to pay salaries, which means they have no cash at all."

The stock has fallen 87 percent in two trading days, pulling the broader market down. Shares in Satyam's main rivals, Infosys, Tata Consultancy Services and Wipro, rose on expectations they would pick up clients.

Satyam will be cut from India's benchmark stock index, the Bombay Stock Exchange's 30-share Sensex, from Monday.

Analysts said recent hopes that Satyam could survive by being taken over had been dashed, given the scope of the scandal and the potential for big legal losses.

"The largest scandal in India's corporate history calls into question the viability of the company as an independent entity," consultancy Forrester said in a Jan. 8 research note.

"As a result, sourcing and IT executives need to actively review their exposure to the company and their options as a cloud of uncertainty hangs over the company.

"Both clients and employees will desert Satyam as a result of competitive wooing," it said.

Satyam specialises in business software and back-office services for clients including General Electric and Nestle.

National Australia Bank Ltd, Australia's top lender, said it was reviewing a contract with Satyam for system development and support to 2011.

L&T SITTING PAT

The chairman of Larsen & Toubro, India's top engineering and construction firm, said the uncertainty around Satyam meant L&T had no plans to alter its near-4 percent stake in the outsourcer, which it built up in early January.

"When we invested, our idea was to strike some sort of go-to-market strategy, some sort of strategic alliance, if it was possible," A.M. Naik told CNBC TV18, noting Satyam's share price was about 188 rupees before Raju's resignation bombshell, far higher than the price at which L&T had bought its stake.

Naik did not rule out an alliance with Satyam once there was clarity on its losses and liabilities, including any from law suits. L&T runs a mid-sized outsourcing unit called L&T Infotech.

Several securities fraud class action lawsuits have already been filed in the U.S. on behalf of investors who bought Satyam American Depository Receipts (ADRs) in the last five years.

Source: Reuters

Even as a Securities and Exchange Board of India (SEBI) team reaches Hyderabad to investigate Satyam Computers' Rs 7000 crore fraud, it
s disgraced chief, B Ramalinga Raju remains untraceable.

After admitting to committing a Rs 7,000 crore fraud on Wednesday, Raju faces arrest and could serve as many as 7-10 years in jail.

Amid mounting speculation over his whereabouts, Satyam management has said that it has no idea where Raju is.

Sources in the Hyderabad police have said that Raju had left for Texas on Wednesday morning from Hyderabad airport. Raju has not been seen in public ever since his confession, but TV reports suggest that he could have left for Texas.

There is a petition pending over his Maytas deal for which British Telecom's Solutions firm - U-paid had demanded presence of Raju and senior directors of Satyam for questioning by its lawyers.

According to another TV report, Raju could also have left for Dubai, however, there is no confirmation. Satyam's former chairman is not reachable on his mobile phone.

Ramalinga Raju on Wednesday admitted to a Rs 7,000-crore fraud in the Hyderabad-based company and revealed that the balance sheet of Satyam had been inflated and that he would subject himself to the laws of the land.

On its part, the Hyderabad police said they would take action against him only if a shareholder or the regulator lodges a complaint. Raju had written a letter to the board giving details of the company's balance sheet which has serious financial irregularities including inflated cash balances running into several crores of rupees.

The 54-year-old US MBA Raju's letter of guilt and resignation to the Satyam board and Sebi on Wednesday morning sledge-hammered India Inc, dumbfounded regulators, pummelled the company's stock, knocked the bottom out of the market, and cast a long shadow over industry in general and the IT sector in particular.

Satyam stocks took a serious beating yesterday with this latest news that has shocked investors. The stocks plunged by almost 80 percent at Rs 39 per share, at day close.

Ram Myanpati is acting as interim CEO of the company, who after expressing ``shock'', swung into damage control mode.

Source:ET

A billion-dollar false accounting scandal at one of the biggest outsourcing firms dominated the country's media on Thursday, with newspap
ers likening it to that at US energy giant Enron.

The Economic Times described Satyam Computer Services founder and chairman B. Ramalinga Raju's admission that accounts and assets had been falsified and profits inflated as "the biggest fraud in India's corporate history."

"The shame and scandal has stunned India Inc., and left lakhs (tens of thousands) of investors and 53,000 staffers out in the cold," it said.

The Hindu said the Satyam scandal was "shocking beyond belief"; The Asian Age called it "the Great Dot Con"; while the Times of India said it was ironic that the firm's name means "truth" in Sanskrit.

At the Business Standard, Raju's revelations of cooking the books to the tune of more than Rs 5000 crore(one billion dollars) in its September-end balance sheet were described as "India's Enron".

"The scale of the fraud and manipulation in the financial statements of the company is mind-boggling", one commentator wrote, calling it "reminiscent of the Enron-Andersen days".

Enron collapsed in 2001 after revelations that bosses hid company losses and hyped the stock's value while selling their own shares on the sly, leading to prosecutions.

Auditors Arthur Andersen were also convicted after allegations that employees shredded documents to hide evidence relating to the scandal.

Raju said in his resignation statement that none of the other board members was aware of the firm's actual financial situation and that no-one had profited from the inflated results.

Questions were asked in the media about the role of Satyam auditors PriceWaterhouseCoopers as well as the robustness of corporate governance and financial regulation in India.

Others feared for the effect on foreign investment, which is already being squeezed by the global economic slowdown, and India's reputation as a place to do business.

The Indian Express said the timing "could not have been worse", with a weak stock market, a reluctance on the part of domestic investors to take risks and their foreign counterparts pulling out of emerging markets.

"This will only exacerbate that problem, just when the Indian economy needs momentum to grow in the opposite direction," it said in an editorial.

The revelations were also "simply catastrophic" given the potential shift in attitudes towards outsourcing as US president-elect Barack Obama prepares to take office, it added.

Source: ET

The chairman of India's embattled Satyam Computer Services resigned Wednesday and said the company's profits had been inflated over the last several years, sending the stock down 71 per cent.

The shocking revelation comes after India's fourth-largest outsourcer's botched attempt last month to buy two construction firms in which the company's founders held stakes and key customer World Bank dropping its ties with the outsourcing company.

"The gap in the balance sheet has arisen purely on account of inflated profits over a period of last several years," Satyam Chairman Ramalinga Raju said in a statement to stock exchanges on Wednesday.

Satyam's woes make it one of India's most high-profile company scandals in recent years. The comments from Satyam sent Indian equity markets in a tailspin, with Bombay's main benchmark index falling 3.9 per cent.

Satyam, which specialises in business software and back-office services for clients such as General Electric, and Nestle, was due to hold a board meeting on January 10 to consider a buyback following a rash of broker downgrades even after the acquisitions were called off.

"I think there is no future for this stock. This case for India is similar to what happened to Enron in the US," said Jigar Shah, senior vice-president at Kim Eng Securities.
"It will not stop at Satyam. Many more companies will come into scrutiny like that. There is a strong possibility investments in India will be affected."

Source: xpress4me