Satyam — truth be damned?

January 7, 2009

If a stock dives 55 percent, is it time to go bargain hunting?

Absolutely not! At least that was the case with India’s Satyam Computer Services after it shocked investors on Wednesday by disclosing most of its profits were cooked up.

The disclosure came after the company’s botched attempt last month to buy two construction firms partly owned by its founders, which sent its shares diving 55 percent in one session by angry investors.

Chairman Ramalinga Raju said: “It was like riding a tiger, not knowing how to get off without being eaten.”

The shares tumbled nearly 80 percent, roiling investor confidence in India and bringing an undignified end to the illustrious career of one of the country’s top businessmen.

The accounting fraud which analysts instantly dubbed as “India’s Enron”, battered confidence in Indian companies and cast a shadow on the once-booming outsourcing industry.

The biggest Indian corporate scandal in memory threatens future foreign investment flows into Asia’s third-largest economy, already facing slowdown pangs.

The scandal rakes up a number of issues not to mention how profits could have been inflated for several years without anyone noticing. Knock Knock. Independent directors? Anyone listening?

And all this from a company which won an award for corporate governance just three months ago.

Any answers?


(Please ignore the analyst recommendation for Satyam currently running on the Reuters site. Preliminary investigations suggest there seems to be a technical glitch. We are looking into it)


We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see

As of 7 Jan 2009 14 Analysts had buy as stock rating for Satyam while 11 have outperform ratings, 6 Hold ratings and 0 Sell ratings… lyst-recommendationbuy-satyam.html


Posted by arun | Report as abusive

I am shocked.
Satyam was – one of the favourite large-cap stocks for investors.
I am left wondering – if such things happen in a large-cap company, which is one of India’s top…What is going on in others?
But there is one thing – this further makes us understand what risk of Equity investing actually is… No company is safe..

Posted by Aditya | Report as abusive

Satyam is not a isolated case. I am a Chartered Accountant and know first hand cooking of the books is normal practice.Scorching profits suddenly evaporate at the onset of bear market.During the bull market most of the companies accumulate lots of toxics in their balance-sheets. How can one explain Reliance’s gross rifining margines. Indian Stock Market is saddled with so many corrupt practices like round tripping(corrupt money going out via illegal channel and coming back as FII money, market manipulation before public issues etc. etc. Becuase of governmnet support and lax SEBI regulations and massive corruption, promoter/operator nexus has looted investors right and left.

Posted by shashikant | Report as abusive

I think it’s fantastic and about time. These companies have been profiting off cheap labor for years. Perhaps this will send a message to US based companies that currently do offshore employment.

The bigger question is, what and who is next? Immigration corruption? PWC was their auditor… How does something like this go unnoticed? They’re going to burn too.


Posted by Jon | Report as abusive

no no this is not good to the market that is already detoriating not just india but for world market this comapany was many billon dollar bpo.i guess so this is beganing to start of cruel market i guess so i keep my finger cross

Posted by rishi(london) | Report as abusive

we know the deeds of ramalinga raju… predicted cashless cash existing on the balance sheet. balance less on balance sheet

Posted by venkat | Report as abusive

I still stand behind Satyam computer services ltd. Satyam is still focussed on customer delight. We will never compromize on anything promised to the clients.

I am here for satyam supporting it. It will deftly come out of this rough patch.

abdul lathif lamba
employee: satyam computer services.

Posted by abdul lathif lamba | Report as abusive

I think this entirething is nig fat lie tofool investigators and investors. Cash must have been generated at Satyam. It is better to claim that no cash was generated at all(inflating profits) as compared to answering the questions on cash that was used for personal purposes. If not all cash balance was inflated, some of it could have been!

Can anyone believe that Raju didnt profit from this entire episode? 3% operating margins for an IT company doesnt sound right. What would be interesting is the investigation into Maytas (the company owned by Raju’s son). I suspect that money was moved from one satyam to Maytas without anyone noticing. Maytas is supposed to have bought tons of Real Estate around IT hub in Hyderabad. Is anyone investigating Maytas? Atleast the news papers should!

It is a shame for Indian Corporations. What Corporate Governance are we speaking about? Also, Indian GAAP lags is archaic. Companies are run by people who run them not for the investors,but as their own personal fiefdoms. I also donot assume there will be much investigation into this entire episode to figureout how much money was really moved into their other personal ventures.

Posted by Sa Ku | Report as abusive

To Jon – “These companies have been profiting off cheap labor for years.GOD BLESS AMERICA – KICK EM OUT!” Your comments speak of your IGNORANCE and ARROGANCE. FYI None of the engineers that work in India are Underpaid in any way. Its the value of the doller that makes labour cheaper in India. You americans can never learn can ya ? You guys yap a lot but working hard and intellegence is not your forte is it ??When it comes to saving your own back side you dont care what happens and who dies in the world. Globalisation is an Americation Invention so LIVE WITH IT.America has earned Billions off it so why whinge

What happened with Satyam is not good , but atleats he was honest and was fortcoming unlike most American companies who dont even come forward until they go bust. This is a bad phase and will pass and satyam will come back ever stronger and harded.

Posted by Sandeep | Report as abusive

Its hard to believe that just Ramalinga Raju would take the blame and clearly states that no one else is involved. Shame…

Posted by Kraz | Report as abusive

This could be just the tip of the iceberg, god knows who else in Satyam is involved and its the investors who take the grunt. This would make no difference to Ramalinga Raju or his family as they would have amassed all the wealth in the world to bail them out.

Posted by Kraz | Report as abusive

Mr Raju made millions by disclosing the facts since he had put option. Mr Yogesh an Indian of Happionaire has divulged and questioned there were motives for these divulsion. This is how small time honest investors are
cheated. Hence elementary education in investing is the need of the hour.

Posted by Altaf | Report as abusive

It takes lots of courage to admit only he is at fault, it is more likely many company people had knowledge. PWC is an equal to blame being their auditors. I used to admire the soft spoken Ramalinga raju hope the company comes out of this crises without much damage.

Posted by Leo Hugh | Report as abusive

U never knoe how many such other companies hav inflated B/S, its quite evident that most of the companies do inflate B/S although not to the extent of Satyam. Is this the end of India growth story… gotta wait n watch… FII will stay on the sidelines n watch wats in store… hopeful of a better corp gov…a shocker.

Posted by Amz | Report as abusive

Satyam is a very big company and we are proud of it and its skilled employees. It will defenitely come out of it and continue to delight its customers ,all the support for Satyam.

Posted by ranee | Report as abusive

Satyam’s Top Leaders Commit To Stay Despite Disclosures By Founder Of Financial Irregularities

Hyderabad, INDIA, January 9, 2009: Satyam Computer Services Limited (NYSE: SAY) said today its top leaders have pledged to remain in the company and work jointly to steer the organization following shocking disclosures by its founder and chairman Mr. Ramalinga Raju of financial irregularities.

Ten of the most senior executives of Satyam, including interim CEO Mr. Ram Mynampati, gathered at its headquarters in Hyderabad, have collectively committed not to resign from the company which has approximately 53,000 associates. Approximately 40 other top managers from various geographical regions – known as the “Leadership Council” – have also given their commitment to remain in the company.

“The pledges of commitment from these leaders, coming hours after disclosures and the resignation of Mr. Raju, underscore the unity and determination of the Satyam leadership to steer the company through this crisis,” the eight leaders said in a joint statement.

The company will hold a press conference at 5 pm IST in Hyderabad to outline an action plan to address key concerns of various stakeholders including customers, investors, employees and business partners.

“Satyam is facing a major crisis in which the unity and clear strategic direction of its top leadership are of paramount importance. This collective commitment will serve to significantly assuage concerns of various stakeholders in a highly fluid and challenging situation,” the leaders added.

The eight top managers in the leadership team are:

Mr. Ram Mynampati, interim CEO
Mr. Subu D. Subramanian, Head, Manufacturing & Automotive
Mr. T.R. Anand, Head of Telecommunications, Infrastructure, Media & Entertainment and Semiconductors
Mr. Keshab Panda, Head, Europe, Energy & Utilities
Mr. Virender Aggarwal, Head of Asia Pacific, India, Middle East, Africa
Mr. Manish Mehta, Head, SAP & Testing Practices
Mr. A.S. Murthy, Head, Global Delivery and Global Leadership Development
Mr. Murali Venkataramani, Head, Commercial
Mr. Hari Thalapalli, Head of Marketing
Mr. S.V. Krishnan, Head of Human Resources

About Satyam
Satyam (NYSE: SAY), a leading global business and information technology services company, delivers consulting, systems integration, and outsourcing solutions to clients in 20* industries and more than 65* countries.

Satyam leverages deep industry and functional expertise, leading technology practices, and an advanced, global delivery model to help clients transform their highest-value business processes and improve their business performance. The company’s 52,865* professionals excel in engineering and product development, supply chain management, client relationship management, business process quality, business intelligence, enterprise integration, and infrastructure management, among other key capabilities.

Satyam development and delivery centers in the US, Canada, Brazil, the UK, Hungary, Egypt, UAE, India, China, Malaysia, Singapore, and Australia serve 690* clients, including 185* Fortune 500. For more information, see

*As of September 30, 2008

Safe Harbor
This press release contains forward-looking statements within the meaning of section 27A of Securities Act of 1933, as amended, and section 21E of the Securities Exchange Act of 1934, as amended. The forward-looking statements contained herein are subject to certain risks and uncertainties that could cause actual results to differ materially from those reflected in the forward-looking statements. Satyam undertakes no duty to update any forward-looking statements. For a discussion of the risks associated with our business, please see the discussions under the heading “Risk Factors” in our report on Form 6-K concerning the quarter ended September 30, 2008, furnished to the Securities and Exchange Commission on 07 November, 2008, and the other reports filed with the Securities and Exchange Commission from time to time. These filings are available at

Posted by Rajat Roy | Report as abusive

I stand by Satyam. Such a great organisation cannot fall overnight like this. They will come out of this mess. One should appreciate Raju’s sincerity in taking blame entirely on him, he would have done it ( not yet proved, letter can be forged also)becuase of the pressures mounted from various communities investors, FIIs, Analysts, politics etc., Auditors cannot be blamed, if year on year, evidence is forged and confirmations given, no way Auditor can proved be grossly negiligent. Still the point remains, why did he comeout with such confession, courts would have taken their own time to prove. At this distress time, nobody is talking about good things it did to society like EMRI (108 assistance), took India global and helped several orphanages.

Posted by Chitra | Report as abusive

I think the Satyam story is the tip of the iceberg.Lets’ what will unfold in the near future.It is a common malpractice harbored by corporates to inflate their profit not only in India but in many countries.In the era of cut throat competition it is a practice being resorted by companies to attract investors.

But I question the role of SEBI.A fraud of such a large scale cannot go without notice.If it has gone than what SEBI was doing because ensuring corporate governance is prime objective of SEBI.Large scale corruption will only result in such misdeeds

Posted by Prabir | Report as abusive

The scandal with Satyam is not good, but at least he was honest and was upfront unlike most US companies who don’t even come forward until they decline. These companies have been profiting off cheap labour for years. Perhaps this will send a message to US based companies that currently do offshore employment.

Many of the companies accumulate lots of gimmicks in their bal-sheets for inflating profits. Because of government support and Lack of SEBI regulations and corruption. This should be come to an End.

Posted by SANTHOSH BP | Report as abusive

I still support satyam, He is always a good and proven persons not by wealth but by service to the society. I think it can bounce back and it will.

Posted by Ramakrishna | Report as abusive

hi, indians..

small fish eat big fish. this is the globaligation. no democracy, no independence in our country and any country. so, comman man’s only one anmy is ‘imperialist’.

Posted by mallemputi adinarayana | Report as abusive

Greed Kills!

Posted by Aninda | Report as abusive

I think he is still lying. The fraud that he is talking about is a simple fraud which is not so easy to hide. I am sure the auditors could have easily detected this fraud. Mint has an interesting perspective. They say that based on what he’s said, it’s impossible that Satyam would be operating on such a low operating marging of 3%. Hence the only logical thing is that he has siphoned off the money and this whole thing is a charade.

Posted by Mumbai | Report as abusive

All the Statements coming from the company simply represent GREED & DECEPTION in its purest form. It is obvious even to a layman that more BIG people are involved in this scam. Attempt is being made to buy the BAILOUT by sheilding OTHER BIG PEOPLE. There is not an IOTA OF TRUETH EVEN IN THE CONFESSION THAT ONLY PROFITS WERE INFLATED. Simply, the money was SYPHONED OFF and the company was STRIPPED.

Posted by neeru | Report as abusive

What about a bail out option? Like Raja (Communist) said, Govt. should take over, then all Satyam Mannavadus will have Govt. jobs. Also we should concider Bharath Rathna for Raju, who will be creating the max. job in Govt. sector, current CM. R. Reddy and Ex. CM. C. Naidu, should be hailed for exclusive growth (inclusive??) More such companies should fail, then we will have more take over by Govt. more employess will have safe jobs. Ideal time calculation software should be abolished as we will have only Ideal time if we are in Govt. Sector. Win Win for all all Mannavadus

Posted by view0507 | Report as abusive

Satyam was,is and will remain one of the TOP company no matter what happens .The SPIRIT OF SATYAM is very high, all the EMPLOYEES AND LEADERS are united and stand by Satyam and will do their BEST to come out of it.

Posted by ranee | Report as abusive

It is shocking to see one of the foremost software giants to get into financial scam. Tremors are so high that i dont think it will ever get up and get going. May be nasty statement but SATYAM saga ends here and one fine day it has to part from this business, it may be taken over by another one and true lies will pay heavy price

Posted by anu | Report as abusive

bailout, as mentioned by one, is going to create more problems. India is a land where people like easy money without doing the hardwork. If satyam gets bailed out and rechristened as a PSU, it will simply keep on doing the same thing again. And Indian government sector is more open to such scandals, given the political cover they recieve. The story will simply contnue.
Corporate India shoudl change the mindset. Making money by cheating customer, shareholders and employees is not a good thing. Corporate India always fail to realize that. Thats the problem!

Posted by icitizen | Report as abusive

Young arrogant and proud but hard working and ‘visionary’ ‘immature’ became a pray for politicinas and now eaten by the ‘tiger he was riding’.
Should be lesson for others.

Posted by Rajaram Pagadala | Report as abusive

very bad, i pray god to come out from this situataion as early as possible.

Posted by kvsmurthy | Report as abusive

Wake up, a crook is a crook even if he does nice thimgs with the stolen goods. Its very convienent for narrow minded fools to blame the USA for this, stand up and take your medicine. India you cant blame every body for you own mistakes.

Posted by Brian Baxter | Report as abusive

Its really very very disappointing what happen with satyam. but the most disappointing thing for PwC. How it is possible to overlook such a big fraud easpecially by the auditors of PwC who claim their superiority for the quality. its really disgusting for PwC as an auditor of the Satyam.
Good luck Satyam and Satyamites…

Posted by Shwetank | Report as abusive

Infosys is more associated with Satyam’s “tainted” than even Raju.

One of the reason Satyam does not have a buyer is the scare-mongering by Infy.

Posted by Brijesh | Report as abusive

He has started it and he has ended it.

Posted by Charles | Report as abusive

Why did such a star get on a tiger in the first place???

Posted by Paul | Report as abusive

Satyam affair is truly one of a kind..It is very curious why the chairman wrote a confession letter all of a sudden?What or who made him write such a self-destructive letter.. The affiliates who dabble in the real estate and infrastructure have bagged huge projects and big plans which were to be apparently funded by the non-existent Satyam money..? Once the market showed its disapproval by beating down its ADRs the Co. withdrew the proposal the next morning itself!.Now after 2 weeks whatever happened in between? this is the intriguing question..It is also strange that the present &former CMs of the AP state to which Satyam belongs chose to distance themselves away from Satyam blaming one another of”helping Satyam grow” which makes everything very curious indeed..

Posted by selvam | Report as abusive

Whatever Rajau and bros has done, they have done a wrong thing and they are paying for it. But lets all be fair that the other employees are not at fault. As commented by the OLD MONK narayan murthy that we should not hire Satyam associates. I agree that some felows who are purely from hydrabad, they think the company as thereself and just consider the other non telugu associates as mere workers. I have a lot of example like that. One manager in Singapore Satyam, Bha…. Ve is very exagerating… AAAAyooo this fellow is too much maaa! Ofcource this company is everyones but this fellow shows that he is ONLY the most concerned. hello mr Bha…. V just get it cleared that this attitude of yours is giving the negative image to the Clients, to the associates working under you and all. WE ARE ALL SATYAMAMITES… and not the only YOU… Change ur triebbele attitude man. there is nothign like ONE man Show. Hope you got it. I have been tortured already and now I dont wnat the same to be happen to other collegues who are still there with you in Singapore.

Posted by Calvin Clean | Report as abusive

this is time to support raju, he is better than many politicians he accepted what he did. he is ready to follow law’s.he is great great great.

Posted by arun | Report as abusive

It does not send a good signal to international community. But india can bounce back,

Posted by astrosolve | Report as abusive

Satyam is much worse than what happened at Enron. Check out this analysis: rch/label/Satyam

Posted by allaroundguy | Report as abusive