The classic accumen
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The Satyam-Maytas deal shocked the world as it revealed fraudulent accounting practices at India's 4th largest company, Satyam Computers. The chairman, Ramalinga Raju, proposed acquiring Maytas Infrastructure and Maytas Properties, companies run by his family members, in a deal worth $1.3 billion. This would have made Satyam a debt-ridden company and transferred most of its cash reserves to companies owned by Raju's family, without consent from other shareholders. The deal was called off after Raju revealed thousands of crores in fudging of Satyam's accounts, overstating cash and understating liabilities, with the involvement of auditors PwC. The fraud violated corporate
The classic accumen
- 2. THE DEAL THAT SHOCKED THE WORLD  INDIA’S 4TH LARGEST COMPANY SATYAM COMPUTERS SERVICE LIMITED CALLED OFF $1.3 BILLION MAYTAS DEAL  THE DEAL WHICH WAS THE MOCKERY OF CORPORATE GOVERNENCE  THE SATYAM FIASCO WHICH WAS TERMED AS THE ENRON OF INDIA SHOCKED THE WHOLE WORLD  RAMALINGA RAJU MAD THE SHOCKING REVELATION ABOUT THE ACCOUNTS FUDGING
- 3.  DECISION WAS NOT ANNOUNCED TAKING INTO A/C ALL THE STAKE HOLDERS OF THE CO.  TWIN MAYTAS CO. MAYTAS PROPERTIES & MAYTAS INFRASTRUCTURES WERE THE COMPANIES RUN BY HIS FAMILY MEMBERS.  DEAL MADE THE CASH RICH CO. INTO DEBT RIDDEN COMAPANY AS ITS ENTIRE CASH HOLDING WOULD HAVE GONE TO MAYTAS  RAMALINGA RAJU WAS HOLDING ONLY 8.5% STAKE  CONSENT OF 91.5% STAKE WAS NOT ASKED  RAMALINGA RAJU WENT FOR SHOPPING, WHEN ECONOMIC SLOW DOWN WAS @ ITS SEVEREST!!! FACTS ABOUT SATYAM – MAYTAS DEAL
- 4. THE FRAUDULENT ACTIVITIES CARRIED ON BY THE CHAIRMAN  PRICEWATERHOUSECOOPERS PwC did contribute in fudging of accounts  BALANCE SHEET CONSISTED OF ACCRUED INTEREST OF RS 360 CRORE  UNDERSTATED LIABILITY OF RS. 1230 CRORE ON ACCOUNTS OF FUNDS ARRANGED BY THE CHAIRMAN  OVERSTATED DEBTOR’S POSITION OF RS 490 CRORE AS AGAINST RS. 2651  IT WAS STATED THAT THE REVENUE OF RS. 2700 CRORE FOR SEP. QUARTER AS AGAINST ACTUAL REVENUE OF RS. 2112 CRORE
- 5. ï‚— AN OPERATING MARGIN OF RS. 649 CRORE AGAINST THE ACTUAL OPERATING MARGIN OF RS.61 CRORE. ï‚— THIS RESULTED IN ARTIFICIAL CASH & BANK BALANCE GOING UP RS. 588 CRORE IN Q2 ALONE. ï‚— RAMALINGA RAJU THOUGHT THAT THE GAP SUCH ARISEN CAN BE FILLED BY PURCHASING MAYTAS INFRASTRUCTURE & MAYTAS PROPERTIES WHICH WAS CALLED OF EVENTUALLY
- 6. BREACH OF TRUST ï‚— DETAILS ABOUT THE MAYTAS WAS NEVER DISCLOUSE TO THE NY OF THE SHARE HOLDERS. ï‚— CLAUSE 49 OF LISTING AGREEMENT TO THE INDIAN STOCK EXCHANGE WAS NOT FOLLOWED
- 7. CLAUSE 49 ï‚— It would be necessary for chief executives and chief financial officers to establish and maintain internal controls and implement remediation and risk mitigation towards deficiencies in internal controls, among others. ï‚— Clause VI (ii) of Clause 49 requires all companies to submit a quarterly compliance report to stock exchange in the prescribed form. The clause also requires that there be a separate section on corporate governance in the annual report with a detailed compliance report. ï‚— A company is also required to obtain a certificate either from auditors or practising company secretaries regarding compliance of conditions as stipulated, and annex the same to the director's report.
- 8. ï‚— The clause mandates composition of an audit committee; one of the directors is required to be "financially literate". ï‚— It is mandatory for all listed companies to comply with the clause by 31 December 2005.
- 9. SOLUTION TO OVERCOME SUCH ISSUE ï‚— THE FUTURE OF 53000 EMPLOYEES WAS ON STAKE ï‚— HENCE THE BEST AVAILABLE OPTION IS ACQUISITION
- 10. THANK YOU