21-day recap: From Maytas to Raju’s fall from grace

Satyam Computer Services got exposed in 21 days. On December 16, Satyam broke the news of Maytas buyout. The acquisition eventually did not go through as it was severy opposed by the shareholders. A series of resigations from the Satyam board took place subesequently. The final blow came on January 7, when Satyam’s promoter Ramalinga Raju wrote a letter to the board saying that Satyam’s balance sheet was forged. The balance sheet showed inflated cash & bank balance of Rs 5040 crore. The accrued interest of Rs 376 crore in the books too was non-existent.
In the Q2 of FY09, reported revenues was to the Rs 2700 crore Vs actual revenue of Rs 2112 crore. The Q2FY09 operating margin reported was Rs 649 crore against Rs 61 crore. The Q2FY09 numbers had Rs 588 crore of artificial cash in books.
Here’s a recap of what happened in the past 21 days.
December 16: Software major Satyam decided to buy Maytas Properties for USD 1.3 billion & 51% stake in Maytas Infra for USD 0.3 billion. Satyam’s ADR plunged 55%
December 17: Satyam called off the deal; stock was down 30%, Maytas locked at 20% down circuit
December 18: Satyam announced Board meeting on December 29 to consider buyback
December 19: Post Maytas U-turn, Upaid filed motion against Satyam for USD 1.1 billion. Earlier in October, Satyam had filed a case against Upaid alleging it of ‘business disparagement’
December 23: World Bank admitted to put a ban on Satyam for data theft
December 25: Mangalam Srinivasan, Non-executive and independent Director resigned
December 26: Maytas ended its downward journey of six consecutive circuits
December 28: Prof. Krishna G Palepu, Non-executive Director and Mr. Vinod K Dham, Non-executive and independent Director of the company resigned
December 29: Satyam Board meeting postponed to January 10
January 3: A sale of pledged shares by lenders of the Ramalinga Raju family led to the family’s stake in Satyam falling to 4.4% from 8.27%
January 6: Satyam clarified news item of merger with Tech Mahindra; ILFS announced sale of 2.45 crore equity shares of Satyam
January 7: Mr. B Rama Raju, Managing Director, admitted fraud; resigned; Satyam books inflated of Rs 5040 crore; DSP Merrill Lynch terminated its engagement with the company. Satyam down 78%
In this period, Satyam has lost market cap from Rs 15183 crore to Rs 2662 crore, a fall of 82%. It has certainly raised questions on corporate governance standards of Indian companies. If one looks at the whole scenario, then it is clearly visible that Satyam never had cash of USD 1 billion. By buying Maytas, Raju wanted to transfer company’s dummy entry of cash reserves from Satyam’s book to Maytas balance sheet. However, strong opposition evident from its ADR fall forced Raju to take a U-turrn and then the stock started falling like a pack of cards. Raju revealed that balance sheet figures were manipulated for the last six quarters. It is indeed a sad day for the Indian markets. Satyam’s historic journey ends on a tragic note.

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