Satyam Computer head quits, admits doctoring books

NEW DELHI – The chairman of India’s Satyam Computer Services Ltd quit yesterday after admitting the company’s profits had been doctored for several years, shaking faith in the country’s corporate giants as shares of the software services provider plunged nearly 80 per cent.

The company’s balance sheet – riddled with ‘fictitious’ assets and ‘non existent’ cash – contained a US$1 billion hole that could no longer be concealed after a deal intended to save the struggling company was scuppered, Chairman B. Ramalinga Raju said in a letter to the board.
‘Every attempt made to eliminate the gap failed,’ said Raju, 53. ‘It was like riding a tiger, not knowing how to get off without being eaten.’
B. Rama Raju, managing director of Satyam Computer and the chairman’s brother, also quit.
News of the fraud dragged down the benchmark Sensex stock index 7,3 per cent to 9,586.88 with Satyam’s shares plummeting nearly 78 per cent to 40 rupees.
The accounting scandal raises questions about the quality of corporate governance in India and is likely to reverberate around the region.
Satyam, which means ‘truth’ in India’s ancient Sanskrit language, had ‘inflated profits over a period of (the) last several years,’ Raju said in his letter, which was released to the Bombay Stock Exchange.
For the July-September quarter alone, operating profit of US$133,4 million had been overstated by almost 11 times the actual result.
Rajeev Sampat, an independent analyst, said the amount and nature of the fraud had shocked investors.
‘It is one of the biggest frauds the Indian capital market has seen. People have been taken by surprise by the gravity of the event,’ he said. ‘After overstating profit and understating debt, the company’s net worth is zero.’
Satyam said in a statement that it was ‘shocked by the contents of the letter’ but the company would rally to find a way forward.
– Nampa-AP