India’s fourth biggest software company Satyam sits at the centre of scandal that is being quoted as the “Enron of India”. Satyam is the child of Ramalinga Raju, built from nowhere over 20 years. Yesterday its shares dropped in value by 78% when Raju told the board that 50 billion of the 54 billion rupees cash and bank balances didn’t exist. What is absolutely staggering is that this had not happened over night and seems to have totally passed under the radar of PricewaterhouseCoopers LLC’s Indian unit, Satyam’s auditor, who are examining Raju’s statement they said.
This only came to the surface following an abortive attempt to merge with two other software companies also linked to Raju. But it gets worse; Raju also admitted to falsely adding about 6 billion rupees to second quarter accounts, and what gets further murky is the fact that the trust holding the family Raju shares dropped its holding from 8.3 to 3.6 per cent last month.
Satyam employs 53,000 people around the globe and has many large well known customers.
I had just put Satyam down as a just another of the potential outsourcing companies that you can use from the Indian region. But I also heard that just last month the Worldbank had told Satyam that it would not get any contracts for at least 8 years following “improper” benefits offered to bank employees. Now I haven’t had any dealings with them for at least a couple of years but the last time I did it was to send them a note warning them about gifts after they had sent me and my boss a Harrods hamper out of the blue at Christmas (which we donated to charity I might add!). This followed several high profile invites to Wimbledon and even to places like the Ritz, “should I be down in London at any time” (again all declined!), all to try and secure business supporting my SAP solution. It would seem this behaviour is more embedded in this company than may have at first been thought…….and I wonder how many organisations may have succumbed to these “incentives”.
There may be a few CEO’s out there who would be wise to ask a few probing internal questions!!
The London-based World Council for Corporate Governance who gave Satyam its Golden Peacock Award yesterday withdrew the prize because Satyam, which means truth in Sanskrit, had withheld material facts.
The interim CEO said today that Satyam may not have enough cash to last the month saying “Our liquidity position is not very encouraging”. What that means for all its customers remains to be seen, and they are big including General Electric, Nestle, Ford, Cisco and even the US Government!