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Satyam: A Rs 7,000 Cr Lie
The irony lies in the name - Satyam, meaning
truth. The real truth is that Ramalinga Raju, the politically-connected,
promoter-chairman of Hyderabad-headquartered Satyam Computers, was lying for
years to shareholders, employees and the world at large, building up to India's
largest-ever corporate fraud of over Rs 7,000 crore.
The country's fourth largest IT company - after TCS, Infosys and Wipro and ahead of HCL - was for several years cooking its books by inflating revenues and profits, thus boosting its cash and bank balances; showing interest income where none existed; understating liability; and overstating debtors' position (money due to it).
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.
This wasn't some small fly-by-night operator that had been caught out. Satyam is listed on the New York Stock Exchange, boasts 185 Fortune 500 companies on its client list and employs 53,000 people - that's equal to the combined number of employees of Tata Steel and Tata Motors (30,000 and 23,000 respectively).
Within hours of the Satyam scandal hitting the headlines, its employees had flooded job portals across the World Wide Web in search of alternate employment. Consider that the Rs 7000-plus crore hole in Satyam's books is way more than the company's entire salary bill of Rs 5,040 crore last year. Worse still, it's running really low on cash, and once-potential suitors have turned wary - they don't know what lies beneath.
The country's fourth largest IT company - after TCS, Infosys and Wipro and ahead of HCL - was for several years cooking its books by inflating revenues and profits, thus boosting its cash and bank balances; showing interest income where none existed; understating liability; and overstating debtors' position (money due to it).
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.
This wasn't some small fly-by-night operator that had been caught out. Satyam is listed on the New York Stock Exchange, boasts 185 Fortune 500 companies on its client list and employs 53,000 people - that's equal to the combined number of employees of Tata Steel and Tata Motors (30,000 and 23,000 respectively).
Within hours of the Satyam scandal hitting the headlines, its employees had flooded job portals across the World Wide Web in search of alternate employment. Consider that the Rs 7000-plus crore hole in Satyam's books is way more than the company's entire salary bill of Rs 5,040 crore last year. Worse still, it's running really low on cash, and once-potential suitors have turned wary - they don't know what lies beneath.
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