Where: Hyderabad, India
January 09, 2009 : Satyam, India’s fourth-largest software company, is at the centre of the country’s biggest corporate scandal. The group’s Chairman, Ramalinga Raju revealed on 7 January, 2009, that around US $1.04 billion (Rs. 5000 crore or 94% of the company’s cash assets, was non-existent, and that figures and account books had been ‘cooked’, or modified, to show profits. Raju resigned from the Board of Directors, and his location is at present unknown.
The immediate effect on stock markets was disastrous, with the Bombay Stock Exchange Sensex figure dropping sharply by almost 750 points.The value of Satyam stock also fell by over 77%, which meant investors in the company lost around US $2 billion . Satyam is said to have 53,000 employees, which recent revelation show is also an inflated figure that allowed Raju to siphon away more than Rs. 20 crore. Any figures released by the group have lost credibility in the public mind. The company has issued an announcement that all the employees will receive their salaries, in spite of the present crisis.
A fraud on such a large scale could not be the work of one man alone, the financial experts are agreed. How the Board of Directors, or the firm of chartered accountants who audited the company’s accounts regularly, failed to take note of the falsified figures is a mystery.
The scandal may have an adverse effect on future foreign investments in India, some analysts feel. Others say it seems unlikely. There was no similar reaction against the Western corporate world when American companies like Xerox were found to have engaged in accounting frauds amounting to US $ 6 million, or the energy firm Enron in financial fraud amounting to US $ 591 million in 2002, or when WorldCom had a US $9 billion accounting fraud in the same year.