End Of Satyam Computers

Today, 7th of Jan 2009 - Saytam Computers as an Independent company is Dead, thanks to Byrraju Ramalinga Raju, who lead the story from the cradle to death. Satyam Computers is the 4th largest IT Services Company in India and is considered a showcase for Andhra Pradesh IT development story - and Raju is considered to be a poster boy. Successive state governments have patronised the Satyam Computers to pop up their Technology friendly credentials.

Raju is not a Technical person. His family comes from agriculturally rich coastal Andhra region. They were agriculturists and reality developers. Raju having studied in US, returned to Hyderabad in late 1980's and started Satyam Computers. From a modest beginning, this company grown into reckoning - listed in NASDAQ, won many awards for corporate governance, and until few months considered a darling for both investors and job seekers.

What Raju admitted today is a serious corporate crime. He "managed" and manipulated" balance sheets to show fictitious Rs 5000 crores (Rs 500 billion) as available cash. Actually Satyam computers is not cash rich but, cash starved company. On his own admission, Raju was running from pillar to post - to fill this gigantic gap with some real assets.

As a last ditch effort, when Raju tried to buy Maytas (his family companies) with non existing cash - slowly the problem started unfolding. Unable to bear the pressure, having realised that "I am riding on a tiger without knowing I getting eaten away soon" - Raju came out in open.

Raju admitted the fraud and owned full responsibility. But, how a fraud to such an extent running over several years gone unnoticed without hint or knowledge of others with in the company is questionable. Apart from auditors, there are many who knew and joined hands with Raju (if this not the case Maytas board approval would not have happened).

There are two issues here as well - artificial profits (number manipulation) and siphoning of the real cash. What happened to all that cash?

Now, Satyam announced Ram Mynampati as interim CEO and formed core group to investigate what went wrong. Ram was part of the system and the core team was there in the company for a long time and their honesty is always in question. At best, they will erase the evidence. If the board is wise, and keen to keep shareholders interest, it is imminent that all these people who are asked to run the interim show are kicked out from the company soon.

Satyam is a private company and the decisions are for the shareholders. At the same time, Government of India and the regulatory bodies have failed again. This is not the first case nor this will be the last case of this nature where authorities will try to wash up the facts, to erase from the public memory.

But the damage that it would cause to India Inc will be severe and more companies will come under scrutiny in the coming days, weeks and months.

Is India Shining Story coming under big cloud!