Satyam chairman admits falsifying accounts
Indian IT giant faces one billion dollar shortfall as chairman admits falsifying accounts for several years
Indian services giant Satyam is facing a 50.4 billion rupee ($1.02 billion) hole in its assets, after chairman Ramalinga Raju admitted falsifying company accounts and assets.
Announcing his resignation from the company that he helped found in 1987, Raju admitted he had been falsifying accounts for several years.
“What started as a marginal gap between actual operating profit and the one reflected in the books of accounts continued to grow over the years,” Raju said in a letter to the Satyam board and the Mumbai Stock Exchange. “It was like riding a tiger, not knowing how to get off without being eaten.”
The financial irregularities began to surface after several other company directors resigned and the World Bank banned Satyam from bidding for its contracts after the services company apparently bribed World Bank employees. Raju also attempted to sell two construction companies to Satyam, a move blocked by shareholders, in a bid to plug the hole.
In the companies last results posting at the end of September 2008, the company reported cash and bank balances of 53.61 billion rupees, of which 50.4 billion was non-existent. Operating margin was only 3% of revenue compared to the 22% reported, and revenues were 21 billion rupees, 22% less than reported.
The news sent Satyam stock down 69%, and dragged India’s SENSEX down 4.3%.
In a statement from the board of Satyam, which employs some 53,000 associates, the company said that it was confident its business model and prospects remained sound.
Ram Mynampati, interim CEO said: "We are obviously shocked by the contents of the letter. The senior leaders of Satyam stand united in their commitment to customers, associates, suppliers and all shareholders. We have gathered together at Hyderabad to strategize the way forward in light of this startling revelation."