Information Madness

Ramalinga Raju, the outgoing chairman of IT major Satyam Computer Services in a shocking letter to his board members has admitted to a scam of around Rs 40 billion. He has said that for years he had been inflating his balance sheets. During the end of September 2008, when the company’s actual balance was Rs 5040 crore, it was inflated to show a balance of Rs 5,361 crore. A non-existent interest receipt of Rs 376 crore was also shown. Similarly he also had overstated the debtors position by crores and showed in the balance sheet, an understated liability of 1200 crores by arranging fictional funds. He admitted to inflating Satyam’s profits for years and said what he had started; he failed to stop as with the company’s growth the gap between the actual profit and reported figures increased tremendously.

The fallout from the Satyam scam has brought the company struggling to survive and cast a shadow on the profile of the entire IT sector. The employees of Satyam who are the most affected by the Satyam scam are deeply shocked with the developments. The recent happenings have lowered their confidence without any doubt and many are thinking of finding a new job. But among all these there are also many, who are keeping their faith and being hopeful that though the company is currently going through a bad phase, the situation will improve in the coming days. A few of the employees also think that a takeover by a bigger company would be beneficial for Satyam.

The Satyam scam has created ripples throughout the country’s business sector. Many feel that the IT sector will be the most affected as their credibility will come under a cloud. The Satyam scam will create many a trouble for the senior executives if the top IT companies, most of who have built their firms with hard work over the years to take on the world’s mighty companies. The Global economic slowdown which had affected the industry’s business, the Satyam scam could not have come at a more difficult time. But also many experts feel that while the immediate effect on the sector is negative, strengthening the sector’s governance will easily restore the situation.

The impact of the Satyam scam showed on the Indian markets on Wednesday. The shares of Satyam plunged nearly 78% and also brought down the broader market. The New York Stock Exchange has already stopped trading the stocks of Satyam Computer Services. In a statement, the NYSE has said it will continue monitoring the situation closely and trading halted until further notice.

Officials have said that the government’s economic offence investigation wing will take a year to probe the Satyam scam. The ministry of Andhra Pradesh has asked the ROC (Hyderabad Registrar of Companies) to look into the matter. When the ROC finds prima facie evidence of the scam it will give directions to the Ministry of Corporate Affairs (MCA) for further investigations.

The Satyam scam, India’s largest corporate scam involving Rs 8000 crore, has made the company hurtling toward disaster. The chairman, Ramalinga Raju has already said in his Resignation Of that he is prepared to face the law and its consequences. After the completion of investigations, the Chairman could face a jail term of upto 7 years along with monetory penalties for misappropriating funds, forging accounts and breach of trust. In addition to these, action could be also taken against the company’s Finance Manager, Chief Financial Officers and Legal & Tax Advisory for their complicity in the scam.

Check out the Resignation Of Ramalinga Raju