This is a detailed Research Report about Mr. Ramalinga Raju (Satyam). It Covers:
- Mr. Ramalinga Profile
- A Picture Gallery showing side-By-side News from 7 most published Newspapers in India
- Latest on His Fraud
- Some Frequently asked questions about the after-effects of Satyam Fraud
- Jokes on Satyam Fraud
Born: September 16, 1954
Achievement: Founder and Chairman of Satyam Computer Services Ltd; Chosen as Ernst & Young Entrepreneur of the Year for Services in 1999
Ramalinga Raju is one of the pioneers of the Information Technology industry in India. He is the founder and Chairman of Satyam Computer Services Ltd.
Ramalinga Raju was born on September 16, 1954 in a family of farmers. He did his B. Com from Andhra Loyola College at Vijayawada and subsequently did his MBA from Ohio University, USA. Ramalinga Raju had a stint at Harvard too. He attended the Owner / President course at Harvard.
After returning to India in 1977, Ramalinga Raju moved away from the traditional agriculture business and set up a spinning and weaving mill named Sri Satyam. . Thereafter he shifted to the real estate business and started a construction company called Satyam Constructions. In 1987, Ramalinga Raju founded Satyam Computer Services along with one of his brothers-in-law, DVS Raju. The company went public in 1992. With the launch of Satyam Infoway (Sify) Satyam became one of the first to enter Indian internet service market. Today, Satyam has a global presence and serves 44 Fortune 500 and over 390 multinational corporations.
Satyam achieved huge number of Awards and achievements under the leadership of Ramalinga Raju. Detail of these awards can be viewed on Satyam Website. Some of Ramalinga Raju’s awards and honors include Ernst & Young Entrepreneur of the Year for Services in 1999, Dataquest IT Man of the Year in 2000, and CNBC’s Asian Business Leader – Corporate Citizen of the Year award in 2002, Asian MAKE (Most Admired Knowledge Enterprise) Award 2008, Partner Innovation Award for Anti-Money Laundering (AML) solution 2007 etc.
Great Leader to Great Thief:
Amid of Economic Recession, Biggest news of 2009 start was, When Mr. Raju announced, Satyam’s Financial statements are based on lies. Raju resigned as chairman, revealing profits had been falsified for years and that $1 billion of cash on the books did not exist. With this news, Satyam badly damaged on Stock Exchange and a big question mark raised on Indian’s largest IT Company and its 53,000 Employees.
Ramalinga Raju resigned after revealing that he had systematically falsified the company’s accounts as it expanded from a handful of employees into a back office giant with a workforce of 53,000 and operations in 66 countries.
Mr. Raju said Wednesday that 50.4 billion rupees, or $1.04 billion, of the 53.6 billion rupees in cash and bank loans the company listed in assets at the end of its second quarter that ended in September were nonexistent.
Revenues for the quarter ending September 30 were 20 percent lower than the 27 billion rupees reported, and the company’s operating margin for the quarter was a fraction of what it declared, he said in a letter to the Bombay stock exchange authorities.
Satyam serves as the back office for some of the largest banks, manufacturers, health care and media companies in the world, handling everything from computer systems to customer service. Clients have included General Electric, General Motors, Nestle and the United States government. In some cases, Satyam is even responsible for clients’ finances and accounting.
The revelations will spark a major shake-up in India’s outsourcing industry, analysts say, and may force many of the world’s largest companies to investigate and completely revamp their back offices. “This development is going to have a major impact on Satyam’s business with its clients,” said analysts with Religare Hichens Harrison on Wednesday. In the short term “we will see lot of Satyam’s clients migrating to competition like Infosys, TCS and Wipro,” they said. Satyam is the fourth largest outsourcing firm after the three named.
In a four-and-a-half page statement to the Bombay stock exchange, Mr. Raju described a small discrepancy that grew beyond his control. “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. It has attained unmanageable proportions as the size of company operations grew,” he said. “It was like riding a tiger, not knowing how to get off without being eaten,” he wrote.
Mr. Raju said he had attempted and failed to bridge the gap, including an attempt in December to buy two construction firms in which the company’s founders held stakes. Speaking of a “deep regret” and a “tremendous burden,” Mr. Raju said that neither he nor co-founder and managing director B. Rama Raju had “taken one rupee/dollar from the company.” He said the board had no knowledge of the situation, nor did his or the managing director’s families.
The size and scope of the fraud raises serious questions about regulatory oversight in India and beyond. In addition to a listing in India, Satyam has been listed on the New York Stock Exchange since 2001, and on Euronext since January of 2008. The company has been audited by PricewaterhouseCoopers since its listing on the New York Stock exchange.
Satyam has been under close scrutiny in recent months, after an October report that the company had been banned from World Bank contracts for installing spy software on some World Bank computers. Satyam denied the allegation but in December, the World Bank confirmed without elaboration on the cause that Satyam had been banned. Also in December, Satyam’s investors revolted after the company proposed buying two firms with ties to Mr. Raju’s sons.
On December 30, analysts with Forrester Research warned that corporations that rely on Satyam might ultimately need to stop doing business with the company. “Firms should take the initial steps of reviewing the exit clauses in their current Satyam contracts,” in case management or direction of the company changed, Forrester said.
The scandal raised questions over accounting standards in India as a whole, as observers asked themselves whether similar problems might lie buried elsewhere. The risk premium for Indian companies will rise in investors’ eyes, said Nilesh Jasani, India strategist at Credit Suisse.
R.K. Gupta, managing director at Taurus Asset Management in New Delhi, told Reuters: “If a company’s chairman himself says they built fictitious assets, who do you believe here?” The fraud has “put a question mark on the entire corporate governance system in India,” he said.
News of the scandal — quickly compared to the collapse of Enron — sent jitters through the Indian stock market, sending the benchmark Sensex index down more than 5 percent. Shares in Satyam fell more than 70 percent.
Just a few months ago, Mr. Raju was trying to convince investors that the company was sound. In October, he surprised analysts with better than expected results, saying he was “pleased” that the company had “achieved this in a challenging global macroeconomic environment, and amidst the volatile currency scenario that became reality.”
But by late December, it seems he had little support from board members or investors and four of the company’s directors resigned in recent weeks. Satyam recently retained Merrill Lynch for strategic advice, a move that is generally a precursor to a sale.
Mr. Raju said in his statement that he “sincerely apologized” to shareholders and Satyam employees and asked them to stand by the company. “I am now prepared to subject myself to the laws of the land and face consequences thereof,” he said.
Heather Timmons reported from New Delhi, and Bettina Wassener from Hong Kong.