Satyam scam

Hello Readers,

You may know the famous quote given by the Sophocles, “Rather fail with honor than succeed by fraud”. Yes, today we are going to talk about the biggest Indian Accounting fraud it is Satyam scam which collapsed India’s fourth-largest IT company from the top slots.

What is the Satyam scam about?

The company misrepresented its accounts both to its board, stock exchanges, regulators, investors and all other stakeholders.

Let's know something inside it. In 1987 Ramalinga Raju establishes Satyam Computer with his two brothers in Hyderabad. In 2001 it was one of the fastest-growing companies in India. So the share price was continuously increasing

At that time, Ramalingam starts to concentrate on the real estate business for that he wanted an investment and he started to show more profit in Satyam computer than actually, it was. He created fake sales invoices and created fake bank balances as well. Now it’s the time for investors, usually, when a company makes more profit, definitely investors show more interest in that company’s shares. 

same happened in Satyam case as well. How Ramalingam was getting money out of it? very simple, he used to sell his shares which are in high price already and on other side pledge his shares in various banks to buy lands in several parts of Hyderabad.  This was happening,

But on Jan 7, 2009 there was a confession letter email Infront of Bombay stock exchange written by Ramalinga Raju. He pleads guilty that he committed Rupees 7,136 crores fraud. Satyam is barred from doing business with the World Bank for eight years. The World Bank alleges that Satyam was involved in data thefts and staff bribery. Shares fall to a record low in four years.

Here, Ramalinga Raju failed miserably in filling the gap that he created in his books of account. which caused an enormous loss of Rs 13,600 crore to the investors of Satyam shares in less than a month

Yes, It is a fraud, which misinformed the market and other stakeholders by lying about the company’s financial position. Even basic facts such as revenues, operating profits, interest liabilities, and cash balances were grossly inflated to show the company in a good financial position.

in June 2009: Tech Mahindra, owned by the Mahindra Group, and Satyam merge to form India’s fifth-largest IT exports company. The merged entity is called Mahindra Satyam.

November 2011: Raju gets bail from India’s supreme court after the CBI fails to file a charge-sheet.

in October 2013: India’s enforcement directorate files a charge-sheet against Raju and 212 others under money-laundering charges.

July 2014: India’s market regulator SEBI bars Raju from the capital markets for 14 years, and also seeks Rs1,849 crore as fine.

IN April 2015: The special CBI court holds Raju and nine other officials guilty of cheating. Among those held guilty are two former partners at PwC.

 

The great lesson from this story is, what you see, and what is declared, is not necessarily always true. Investors should always be careful while investing. do proper research before capitalizing on your money. It’s been 11 years for the scam which sent shockwaves across the corporate sector and led to a series of policy changes in India.