What was Satyam scam which toppled India’s fourth largest IT company from the top slots

The Satyam Computer Services scandal was a corporate scandal affecting India-based company Satyam Computer Services in 2009, in which chairman Ramalinga Raju confessed that the company’s accounts had been falsified.

The Satyam scandal was a Rs 7,000-crore corporate scandal in which chairman Ramalinga Raju confessed that the company’s accounts had been falsified. On January 7, 2009, Ramalinga Raju sent off an email to Sebi and stock exchanges, wherein he admitted and confessed to inflating the cash and bank balances of the company. Weeks before the scam began to unravel with his famous statement that he was riding a tiger and did not know how to get off without being eaten. Raju had said in an interview that Satyam, the then fourth-largest IT company, had a cash balance of Rs 4,000 crore and could leverage it further to raise another Rs 15,000-20,000 crore.

Ramalinga Raju was convicted with 10 other members on 9 April 2015. The 10 people found guilty in the case are: B Ramalinga Raju; his brother and Satyam’s former managing director B Rama Raju; former chief financial officer Vadlamani Srinivas; former PwC auditors Subramani Gopalakrishnan and T Srinivas; Raju’s another brother B Suryanarayana Raju; former employees G Ramakrishna, D Venkatpathi Raju and Ch Srisailam; and Satyam’s former internal chief auditor V S Prabhakar Gupta. Ramalinga Raju and three others given six months jail term by SFIO on 8 December 2014.

Sebi on PWC

Finding PwC guilty in the Satyam scam, India’s capital markets regulator SEBI on 10 January 2018 barred its network entities from issuing audit certificates to any listed company in India for two years. SEBI has also ordered the disgorgement of over Rs 13 crore of wrongful gains from the auditing firm and its two erstwhile partners who worked on the IT company’s accounts.

Takeover by Tech Mahindra

After the fraud came to the light, the government had ordered an auction for sale of the company in the interest of investors and over 50,000 employees of Satyam Computers. It was acquired by Tech Mahindra, and was then renamed as Mahindra Satyam, and was eventually merged into the parent company. The Satyam saga eventually turned out to be a case of financial misstatements to the tune of approximately Rs 12,320 crore, as per Sebi’s probe then. Citibank froze all its 30 accounts in 2009.

Fake bills

Raju also manipulated the books by non-inclusion of certain receipts and payments, resulting in an overall misstatement to the tune of Rs 12,318 crore, shows an analysis of findings of Sebi’s probe. As many as 7,561 fake bills which were even detected in the company’s internal audit reports and were furnished by one single executive. Merely through these fake invoices, the company’s revenue got over-stated by Rs 4,783 crore over a period of 5-6 years. The probe itself continued for almost six years and found that fictitious invoices were created to show fake debtors on the Satyam books to the tune of up to Rs 500 crore.

Get live Share Market updates and latest India News and business news on Financial Express. Download Financial Express App for latest business news.

Most Read In Industry