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"It is with deep regret and tremendous burden that I am carrying on my conscience, that I would like to bring the following facts to your notice:
1. The Balance Sheet carries as of September 30, 2008,
a) Inflated (non-existent) cash and bank balances of Rs 5,040 crore (as against Rs 5,361 crore reflected in the books);
b) An accrued interest of Rs 376 crore, which is non-existent
c) An understated liability of Rs 1,230 crore on account of funds arranged by me;
d) An overstated debtors' position of Rs 490 crore (as against Rs 2,651 reflected in the books);
2. For the September quarter(Q2) we reported a revenue of Rs 2,700 crore and an operating margin of Rs 649 crore(24 per cent of revenue) as against the actual revenues of Rs 2,112 crore and an actual operating margin of Rs 61 crore (3 per cent of revenues). 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 several years (limited only to Satyam standalone, books of subsidiaries reflecting true performance).
What started as a marginal gap between actual operating 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 the company operations grew significantly (annualised revenue run rate of Rs 11,276 crore in the September quarter, 2008, and official reserves of Rs 8,392 crore).
The differential in the real profits and the one reflected in the books was further accentuated by the fact that the company had to carry additional resources and assets to justify a higher level of operations thereby significantly increasing the costs.
Every attempt made to eliminate the gap failed. As the promoters held a small percentage of equity, the concern was that poor performance would result in the takeover, thereby exposing the gap. It was like riding a tiger, not knowing how to get off without being eaten.
The aborted Maytas acquisition deal was the last attempt to fill the fictitious assets with real ones. Maytas' investors were convinced that this is a good divestment opportunity and a strategic fit.
One Satyam's problem was solved, it was hoped that Maytas' payments can be delayed. But that was not to be. What followed in the last several days is common knowledge.
I would like the board to know:
1. That neither myself, nor the Managing Director (including our spouses) sold any shares in the last eight years - excepting for a small proportion declared and sold for philanthropic purposes.
2. That in the last two years a net amount of Rs 1,230 crore was arranged to Satyam (not reflected in the books of Satyam) to keep the operations going by resorting to pledging all the promoter shares and raising funds from known sources by giving all kinds of assurances (statement enclosed only to the members of the board).
Significant dividend payments, acquisitions, capital expenditure to provide for growth did not help matters. Every attempt was made to keep the wheel moving and to ensure prompt payment of salaries to the associates. The last straw was the selling of most of the pledged shares by the lenders on account of margin triggers.
3. That neither me nor the managing director took even one rupee/dollar from the company and have not benefited in financial terms on account of the inflated results.
4. None of the board members, past or present, had any knowledge of the situation in which the company is placed.
Even business leaders and senior executives in the company, such as, Ram Mynampati, Subu D, T R Anand, Keshab Panda, Virender Agarwal, A S Murthy, Hari T, S V Krishnan, Vijay Prasad, Manish Mehta, Murli V, Shriram Papani, Kiran Kavale, Joe Lagioia, Ravindra Penumetsa, Jayaraman and Prabhakar Gupta are unaware of the real situation as against the books of accounts. None of my or managing directors' immediate or extended family members has any idea about these issues.
Having put these facts before you, I leave it to the wisdom of the board to take the matters forward. However, I am also taking the liberty to recommend the following steps:
1. A task force has been formed in the last few days to address the situation arising out of the failed Maytas acquisition attempt.
This consists of some of the most accomplished leaders of Satyam: Subu D, T.R. Anand, Keshab Panda and Virendra Agarwal, representing business functions, and A S Murthy, Hari T and Murali V representing support functions.
I suggest that Ram Mynampati be made the chairman of this Task Force to immediately address some of the operational matters on hand. Ram can also act as an interim CEO reporting to the board.
2. Merrill Lynch can be entrusted with the task of quickly exploring some merger opportunities.
3. You may have a 'restatement of accounts' prepared by the auditors in light of the facts that I have placed before you.
I have promoted and have been associated with Satyam for well over 20 years now. I have seen it grow from few people to 53,000 people, with 185 Fortune 500 companies as customers and operations in 66 countries. Satyam has established an excellent leadership and competency base at all levels.
I sincerely apologise to all Satyamites and stakeholders, who have made Satyam a special organisation, for the current situation. I am confident they will stand by the company in this hour of crisis.
In light of the above, I fervently appeal to the board to hold together to take some important steps. TR Prasad is well placed to mobilise a support from the government at this crucial time.
With the hope that members of the Task Force and the financial advisor, Merrill Lynch (now Bank of America), will stand by the company at this crucial hour, I am marking copies of the statement to them as well.
Under the circumstances, I am tendering the resignation as the chairman of Satyam and shall continue in this position only till such time the current board is expanded. My continuance is just to ensure enhancement of the board over the next several days or as early as possible.
I am now prepared to subject myself to the laws of the land and face the consequences thereof.
(B Ramalinga Raju)
Copies marked to:
1. Chairman SEBI
2. Stock Exchanges.
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the fraud done by ramalingaraju give us a idea of connection between economics and politics. these two fields r different in seeing but some how they r related.Since without political help this fraud is immpossible.it also show weakness ofour bankig system. goverment have to tke total responsibity of it and form hard law so it will not repeat in any other company.
satyam chairman ramalingaraju had shown an iproper balance sheet 2 pwc since 2002 and it is paying taxes to the govt of india from past 7 years on their fictious profits . then what had been doing by the IT Dept in that period . was not it enquired about their profits and what about the invoices had shown by the satyam.was it in hibernation stage at that time.is there any relationship between big fishes in govt of india and satyam fraud
india's biggest fraund can't be done by a single person, lots of higher authority people are engaged in this fraud, being a fourth largest company it did fraund of 7136 cor . nw there is a ques for top 3 company !!!
i think Raju should not be given priviliged facilities at jail as the crime committed by him is similar to the terrorist attack, an attack on the interest of the stakeholders.
my God such a lot money..the government should take steps to bring out all the black money in india and show the many hidden faces of black sheep like Raju
its really a matter of great pain and sorrow for the people IT sector.As we (indian) was the top on IT sevices but tis fraud brings the great shame for this sector.It will also effect the new incoming project to indian company.New youths who are opting there career in this sector are in great shock.May GOD bring the situation to peace and save the young IT professional from Going to be unemployed
its really a bad time for auditors. Shame on audit teams who not taken care for the responsibility of wrk entrusted to them..
The shareholders may not trust the audited balance sheet of other Companies as well.Tha Board of Directors may have horrible time explaining the details to shareholders at next AGM.and this may not be restricted only to Satyam Group.
'satyam' means promise in sanskrit or tamil..Mr.Raju has bought disregard to entire IT Faternity and Satyam should be banned from all operations and government should take over the company and run the operations if deemed fit
M also really apreciate wid Mr Raju. As he condemn of what he had done wrong. I think in dis materialistic world no one can dare openly like Raju after commiting such kind of fraud. May god rescue him from present situation and fortify him so dat he can escape of dese bad events n do his work wid loyality after dis time>>>>>
jaspreet,have u gone bonkers ? this letter of raju is only for bluffing the law so that he can get his sympathy plea forward. plz grow up and experience the real world ...cheers
THIS IS A CLEAR LEARNING EXAMPLE HOW ETHICS IN BUSINESS IS VERY IMPORTANT TO HOLD THE SUCESS OF A COMPANY. NEVER THE LATE APPRICIATE THE RAJU FOR HOLDING UP THE TRUTH AND PROVIDING AN OPPURTUNITY FOR EMPLOYEES TO SAVE THE COMPANY. MOST IMPORTANT THING AT THIS POINT IS TO MEET THE CUSTOMER DEAD LINES AND KEEP EMPLOYEE MOTIVATIONS HIGH. THIS IS ALSO A CHALLENGING OPPURTUNITY FOR EVERY EMPLOYEE TO BRING BACK ONE OF THE LARGEST COMPANY TO EARLIER GLORY.
atlast the persons who get affected by the fraud is the retail investors,bcause the employees can get some job (may take some more time) but think of the retail investors who on the hope that there money will be safe in the hands of the prestigous company, the really affected people is the retail investors and sebi and the goverment has to take real steps to help them
i accept that it has been a great financial crisis for the company,, but surely many top shots are involved in this scandal,also actions should be taken against the authorised auditors,,, also the balance sheets of other high profile companies should be tetrascalic evaluated. the work record and the financial backgroun should be kept under a core test... i feel this is the way to supersede the future crisis...
I REALLY APPRECIATE Mr RAJU OPEN ACCEPTENCE OF THE WRONG DOING DONE BY HIM, I HAD BEEN INVOLVED IN THE BIG INDUSTRIES AS ASUPPLIER OR CONSULTANT, AND FOUND ALL BIG COMPANIES ADDOPT THE SAME METHOD AS DONE BY SATYAMS, SEE WHAT IS THE RECORD OF CBI IN COURT CASES M THE CLAIM MAY BE TALL FOR WINNING THE CASES BUT IN ACTUAL MAJORTY OF THE CASES ARE WON ONLY ON PLEAD GUILT, SAME Mr RAJU HAD PLEAD GUILTED, MEANS WE SHOULD NOW LEAVE THIS PERSON FREE , HOW MANY OF US CAN DO WHAT Mr RAJU HAD DONE IN ACCEPTING THE FRAUD, MAY GOD GIVE STRENGTH TO RAJU
Raju is no saint in confessing to his crime. He wouldn't have confessed if the Maytas deal had not flopped.
i am personally very startled at what has happened but definately i am happy that all the it employees who are so proud of thier money and position are in trouble!!!
Hi Priyanka,you know "Every dog has his DAY." this time we r ..nxt time you or some one else ..so better be ready...The EARTH is round..got it...!!!
While the IT Giant is heading southward now, it’s a tough time for its employees. Their futures are at stack now and they have to start finding new jobs in this hour of crisis where already there is economy slowdown. I guess the better ways to get a job quickly are by updating their profile on job site or by friend, family reference. They should try out www.jobafair.com which is providing both of these facilities.
This is absolutely shocking and i fear the jobs of innocent IT engineers who work day
It is really sad that Raju has landed himself in this situation. While he is responsible for the state of affairs, it must be noted that all that he did was for the sake of the organisation and to shield from the pressures of the market on a QoQ basis.It is rare to see entreprenuers these days taking the risk of building organisations, give employment to thousands,and not hide behind easy going high paying jobs that gives comfort and pleasure. So, I do feel sad for him and also for the fact that this would deter many youngster to become entreprenuers.
In our college days, getting selected for satyam was a great achievement.But, the name and fame achieved through fraudalant manner is a shameful act of B.R. Raju, a real shame in the face of entire Andhra Pradesh
No one really knows which are the other so called "respectable " companies who are about to disclose the " reality " of their past corporate economic activities in the Satyam way ... Poor Investors and their employees will be easily get fooled...Pathetic.
Satyam Renamed Jhutham,Good after Enron, Madoff and now Satyam (oh Sorry Jhutham)
Mr. Raju must not be left unpunished as also those who are associated with this fraud.What is the caliber of the Board members and senior executives if they claim not to have known anything about this fraud? This is an eyewash to protect people.Does Mr. Raju even know how many people he may have financially and emotionally ruined ?Does Mr. Raju know what damage he has done to the credibility of Corporate India ? Someone must punish him and his cohorts so severely that "others" who may be doing similar activities immediately desist and own up : those who even remotely think they can do such frauds must know the consequences they face.Ostracise Mr. Raju in the business and social community and let him suffer mentally and physically.This is a sad day for corporate governance in India.
It is unfortunate, but the "real" fact is that this happens all the time and all around us. Every, and I repeat, every entrepreneur does "what the laws and regulations believe is" fraud to a certain extent (small or big), every leader has blood in his hands (directly or indirectly), every religious man has some sin on his soul... very unfortunate, but fact of life.
Raju (B Ramalinga Raju) adds a new achievment in his life ...after creating a company like satyam the 4th largest ..now he has created a fraud, a fraud with emplyees, stake holders, money lenders
Life has ups and downs.May be its a tough time for him.it doesnt mean commentators are good players.be positively he would come back.
it was a shocking news for us especially who thrives in IT industries. The culprits shouldn't be vindicated whoever it is as it affect a multitude who depends their job for the survival. One request to everyone ' stop digging the well further but pray to get things resolved in less torment.
Shows the pathetic state of Affairs of our Audit
major fraud of the software company
How does one react to situation of this kind. Mr Raju has carried this fraud for so many years and now he is disclosing them with such innocent words that he feels guilty of what he has done.He has literally not only played with the life of thousands of employees that work for Satyam but also with the hard earned money of the investors. You always heard politicians of being corrupt, what will you call this, a person whom many would have emulated as a successful corporate leader...........I don't really know what implications it would bring out for other companies as far as fii/Fdi are concerned.
Satyam got peacock award for corporate governance.Who the hell gave it this award. I think even a child of 12th class can handle a company now. Such a big blunder by an Alumnus of HArward. Unbelievable!!! Now this incident will effect indian outsourcing industry as the customers will doubt our integrity. There should be strict action against Raju. He shouldn't be spared for using money of investors and leaving satyam thick and thin