Rise and fall of SATYAM and the inside story of Satyam Conflict

1. SATYAM
CONFLICT

2. TABLE OF CONTENTS
• BRIEF INTRODUCTION
• HISTORY
• RISE OF SATYAM
• THE CONFLICT
• SOURCES OF CONFLICT
• THE THRESHOLD
• EFFECTS OF CONFLICT
• THE GUILTY
• TYPE OF CONFLICT
• THE HIDDEN TRUTH

3. CURTAINS TO BE RAISED
• From stars to behind the bars.
• From `544 to `11.37.
• How Asia's 2nd largest IT company fell off.
• Conflicts was functional or dysfunctional?

4. From stars to behind the bars

5. From `544 to `11.37
544
600
500
400
300
200
100
11.37
0
Category 1 Category 2 Category 3 Category 4

8. INTRODUCTION
• Satyam Computer Services, presently Mahindra Satyam is an Indian
IT services company based in Hyderabad, India.
• It was founded in 1987 by Ramalinga Raju.
• Satyam network covers 67 countries across.
• It served over 654 global companies.
OOPS…
• The company employs 53,000 IT professionals across development
centers in India , the United States , the United Kingdom , the United
Arab Emirates , Canada , Hungary , Singapore , Malaysia , China
, Japan , Egypt and Australia .

9. HISTORY
• 1987
Incorporated as private limited company
• 1991
Debuts on the Bombay Stock Exchange (BSE) IPO
oversubscribed by 17 times.
• 1999
Assessed at SEI CMM® Level 5 Satyam Infoway (Sify) becomes
the first Indian Internet company listed on NASDAQ Satyam
forms joint venture with TRW Inc. Presence established in 30
countries .
• 2000
Associate count reaches 10,000 Satyam receives National HRD Award from
Indian government Dataquest names Ramalinga Raju IT Man of the Year.

10. • 2002
Satyam BPO launched in Hyderabad.
• 2006
Revenue exceeds US$1 billion .
• 2007
Becomes the Official IT Services Provider for the FIFA
World Cups, 2010 (South Africa) and 2014 (Brazil) .
• 2008
Revenue crosses US $ 2-billion mark Adopts new
tagline “Business Transformation. Together.”

11. CONFLICT WITH UPAID
• UPAID was an England based company and was working with SATYAM since 1997.
• 2002
UPAID complained about Satyam's quality of work.
Satyam said it had not been paid, and that the IPRs reverted to it.
• 2007
UPAID Systems filed a case of intellectual fraud and forgery against Satyam.
• TYPE OF CONFLICT
This was an INTER GROUP conflict that is conflict between two groups. Here
conflicting parties were SATYAM and UPAID.
• SOURCE OF CONFLICT
Here source of conflict was the INFORMAL AGREEMENT that leads SATYAM to
England court.
• RESULT
The court eventually refused the injunction and held that the Settlement
Agreement did not deprive Upaid of future rights to sue for breach of Assignment
or for alleged fraud in relation to that Agreement.
So SATYAM has to pay back the amount to UPAID.
• EFFECT OF CONFLICT
This conflict was proved to be DYSFUNCTIONAL for SATYAM as they had to return
to Texas.

12. CONFLICT WITH WORLD
BANK
Forensic experts and bank investigators of World Bank discovered that spy software
was covertly installed on workstations inside the bank's Washington
headquarters, allegedly by one or more contractors from Satyam Computer
Services.
TYPE OF CONFLICT
It was again an inter group conflict as it was between two parties that is
SATYAM and WORLD BANK.
SOURCE OF CONFLICT
Here in this case the spy software installed by one of the contractor of
SATYAM at work station of WORLD BANK proved to be the only source of
conflict.
RESULT
In February 2008, the World Bank temporarily suspended Satyam from
bidding on new contracts, and then in September formally made the firm
ineligible to bid on future contracts.
EFFECT OF CONFLICT
Once again the conflict proved to be DYSFUNCTIONAL for SATYAM
COMPUTER SERVICE LTD as results were not in their favor.

13. CONFLICT WITH
SHAREHOLDERS
2008
The company attempted to acquire two infrastructure
companies.
MAYTAS MAYTAS
INFRA PROPERTIES
FOR $1.6
BILLIONS

14. • This eventually led to a review of the deal by the government, a veiled
criticism by the vice president of India and Satyam’s clients re-evaluating
their relationship with the company.
• Satyam’s investors lost about INR 3,400 crore in the related panic selling.
TYPE OF CONFLICT
This was an INTRAGROUP conflict, as it happened between the shareholders
and the directors of the company.
SOURCE OF CONFLICT
Here source of conflict was the decision taken by the directors which was not
supported by the shareholders.

15. RESULT
• When Raju announced the company would spend $1.6 billion
to buy Maytas only to reverse the decision a few hours later
under shareholder pressure.
• Satyam ADRs lost 50% of their value overnight.
• Satyam’s shares fell 55% on the New York Stock Exchange .
• Three members of the board of directors resigned on 29th Dec
2008.

16. EFFECT OF CONFLICT
• Once again the conflict was proved to be DYSFUNCTIONAL for
the company due to the negative results mentioned in
previous slide.
DYSF
UNCTI
ONAL

17. THE INSIDE STORY
• December 29, 2008:
Resignation of directors starts…
Prof. Krishna G Palepu, Non-Executive Director and Mr.
Vinod K Dham, Non-Executive & Independent Director
resign from the board.
• Jan 7, 2009:
Satyam receives letter from chairman
tendering resignation.
• He notified board members and the Securities and Exchange
Board of India (SEBI) that Satyam's accounts had been
falsified.

18. RESIGNATION LETTER

19. DESCRIPTION OF FALSIFICATIONS
ACTUAL DEBT
CURRRENT ASSETS WAS 2161
OVERSTATED
490 CR.
ACTUAL CASH IN
BANK WAS
5000 INFLATED
312 CR.
NO ACCRUED
INTEREST 376.34 UNDERSTATED
LIABILITIES CR. LIABILITY 1230
Cr. Which was
ARRANGED BY
MR.RAJU
ARTIFICIALLY ADDED 588 OPERATING
PROFIT .
INCREASING THE CASH RESERVE ONLY
FOR Q2 ALONE TO 588

20. EFFECTS
• This has resulted in artificial cash and bank balances going up by
Rs 588 crore in Q2 alone
• The gap in the balance sheet has arisen purely on account of
inflated profits over a period of last several years (limited only
to Satyam standalone, books of subsidiaries reflecting true
performance).
• What started as a marginal gap between actual opera ting 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 significantly (annualized revenue run
rate of Rs 11,276 crore in the September quarter, 2008 and
official reserves of Rs 8,392 crore).
• He said “it was like riding a Tiger,
not knowing how to get off “

21. ANOTHER LIE
•Raju accepted that
12000 out of 53000 of
his employees were
fake and never
existed.

22. JOIN THE DOTS

23. WHAT HAPPENNED NEXT????
• Immediate Market Reaction:
Sensex stock index dropped 7.3%.
• The New York Stock Exchange has halted trading in
Satyam stock.
• India’s National Stock Exchange has announced that it will
remove Satyam from its CNX Nifty 50-share index on January
12 Satyam’s shares fell to 11.37 rupees on 10 January 2009
, their lowest level since March 1998 . Last year they hit a high
of 544 rupees.

24. WHAT HAPPENED
TO RAJU???
• Raju and his brother, B Rama Raju, were then arrested by the CID
Andhra Pradesh police headed by Mr. V S K Kaumudi, IPS on charges
of breach of trust, conspiracy, cheating, falsification of records.
• Raju was hospitalized in September 2009 following a minor heart
attack and underwent angioplasty.
• Raju was granted bail on condition that he should report to the local
police station once a day and that he shouldn't attempt to tamper
with the current evidence.
• This bail was revoked on 26 October 2010 by the Supreme Court of
India and he has been ordered to surrender by 8 November 2010.
• The people of his native village, Garagaparru, hail the development
works undertaken by the Byrraju Foundation, the charitable arm of
Satyam.
• Ramalinga Raju was Granted a bail by the supreme court on 4th
november 2011 after the Central Bureau of investigation failed to
chargesheet Raju within the statutory period.

25. AND FINALLY……
• SATYAM got its new identity as MAHINDRA SATYAM after been
over taken by TECH MAHINDRA.
MAHINDRA
SATYAM
SATYAM

26. THE SAME QUESTION.

28. REFERENCES
• www.theregister.co.uk/2008/12/.../world_bank_bans_satyam
• www.informationweek.com/news/global-cio/interviews
• www.business-standard.com › Home › Companies & Industry
• www.businessweek.com/globalbiz/content/.../gb20081229_2
67676.h
• http://spicyipindia.blogspot.in/2008/01/satyam-evam-upaid-
who-paid.html
• http://en.wikipedia.org/wiki/Byrraju_Ramalinga_Raju

29. PRESENTED BY
• NAVJOT SINGH (A-26)
• HARKIRAT SINGH (A-24)
• PARAM CHEEMA (A-27)
• MANPREET SINGH (A-20)
• VARUN (A-37)