Satyam might be facing the heat right but the Satyam saga has clearly dealt a blow to the Indian IT dream.
The IT industry represents modern India. They are the ones who have created brand ‘India’ on Wall Street.
But Raju's fraud might change the Indian IT dream forever.
After all, the fourth largest Indian IT company, Satyam has fallen off the cliff, in what unfolds as the most dramatic frauds of recent times.
Now, the clients would think twice before engaging with an Indian IT vendor.
The reason is simple—they would ponder over whether the law of the land can be trusted anymore.
However, Narayan Murthy, the founder of Infosys, said "One apple is bad doesn’t meant everyone is bad."
Well, even as Murthy calls it a one off case, Infosys has already started promising more disclosures to its investors and whatever it takes to keep the clients’ trust.
Also, industry body Nasscom has swung in action, asking companies to switch to the top gear so as to retain their clients.
Som Mittal, President of Nasscom, said,"We are asking companies to make more disclosures on governance issues to their clients."
It’s certainly going to be tough ride for the Indian outsourcing industry with the recessionary pressure of the west on one hand and now, an image crisis.
Meanwhile, the international biggies like IBM and HP will benefit directly, unless the industry leaders go all out to defend their credibility.
Satyam Fraud : Here is the Full text Letter of Raju to Board
Following is the text of the letter Raju wrote to the Satyam board:
"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..."
2 Reactions to this Posts
Anonymous
January 8, 2009 at 10:11 AMpublish it in some paper
Unknown
February 27, 2009 at 8:08 PMThankyou for posting this letter. Very intresting post. It helped me in school's current affairs project
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