Satyam India’s Enron : How the Scandal Unfolded

Brief of Satyam Computer
On 24th June 1987, Satyam Computer was incorporated as private limited company for providing software development and consultancy services to large corporation. The company was promoted by B Rama Raju and B Ramalinga Raju.
In 1991, Satyam Computers became the first Indian company to provide offshore services. His first major client John Deere, was skeptical about outsourcing to Satyam, but Raju`s simple extensive management module convinced it.
What started as humble beginning in 1990`s by the end of the decade catapulted the Satyam Computer into the big league of IT companies in India. Satyam became the fourth largest IT Company.
‘Humpty Dumpty had a great fall’, Satyam computer image got severe hit that  can never be mended when its promoter accepted in writing to SEBI about the fudging of books of account of the company for showing inflated profit. Investor lost all out faith in the working of the company and dumped the share of the company. Satyam share price had a free fall on 07 Jan 2009 and it closed about 80% down from the previous day close price at Rs40. Chart shown below


Satyam Stock Crash

As can be seen from the chart the stock of Satyam Computers fell from Rs.180 to Rs.5 in 2 trading sessions.



  • 2008 December 16– Satyam Computer Services announces $1.6 billion acquisition of 100% stake in Maytas properties and 51% stake in Maytas Infra, both promoted by Ramalinga Raju and sons.
  • December 17-Satyam-Maytas deal is scrapped following investor-shareholders rebellion. Raju mulls on the share buyback.
  • December 21-Government asks registrar of companies to submit the report with factual evidence on Satyam-Maytas deal.
  • December 24-World Bank bars business with Satyam for 8 years starting September 2008.
  • December 25– Academician and independent director Mangalam Srinivasan exits from Satyam on Christmas owning moral responsibility for not voting against it.
  • December 28– Satyam Computer defers crucial board meet from December 28 to January 10.
  • December 29– Satyam appoints DSP Merrill Lynch to review strategic option and assess implications of possible dilution of Ramalinga Raju`s stake; Non-executive director Krishna Palepu and in dependent director Vinod Dham resign from board.
  • December 30– Satyam`s board nearly halved as Indian school of Business dean Rammohan Rao also quit.
  • January 2– Satyam discloses to stock exchange that Raju and his family have pledged all their shares, held in a corporate entity SRSR limited, to institutional lenders.
  • January 3-Ramalinga Raju`s stake in Satyam falls to 5.13% from 8.27% as lenders sell shares.
  • January 6-Ramalingu Raju`s stake falls further to 3.6% from 5.13%.
  • January 7– Chairman Ramalinga Raju and MD Rama Raju resign.
  • January 8, 2009: Citibank freezes Satyam’s 30 accounts.
  • January 9, 2009: Ramalinga Raju and his younger brother B. Rama Raju arreste. Central govt disbands Satyam’s board, to appoint its own 10 directors.
  • Jan 9, 2009: Satyam removed from Sensex, Nifty.
  • Jan 10, 2009: Satyam’s former CFO Srinivas Vadlamani arrested.
  • Jan 11, 2009: Government appoints Deepak Parekh, Kiran Karnik and C. Achuthan to Satyam board.
  • February 2009: CBI takes over investigation, goes on to file three chargesheets.
  • Mar 6, 2009: Gets SEBI nod for bidding process to select investor.
  • April 22, 2009: Tech Mahindra makes open offer to Satyam shareholders at Rs. 58/share, offer to close June 9.
  • June 22, 2009: Mahindra unveils new brand identity for Satyam, Mahindra Satyam.
  • 2010: Raju says charges levelled by CBI are false.
  • November 2, 2011: Supreme Court grants bail to Raju since CBI failed to file chargesheet on time.
  • October 28, 2013: Enforcement Directorate files a criminal complaint against 47 persons and 166 corporate entities headed by Ramalinga Raju.
  • December 8, 2014: Ramalinga Raju and three others given six months jail term by SFIO.
  • December 23, 2014: Judge postpones verdict citing voluminous documents.
  • March 9, 2015: Special court defers verdict till April 9.
  • April 9, 2015: All 10 accused found guilty



The Global corporate community was shocked and scandalised when the chairman of Satyam, Ramalinga Raju resigned on 7 January 2009 and confessed that he had manipulated the accounts by US$1.47-Billion.

The fudging of books of account by the promoters of Satyam is one biggest fraud that Indian corporate world has witnessed. Raju admitted the falsifying of the earning and asset in his letter to the SEBI chairman. He admitted of the following:

  • Inflated cash and bank balance of Rs 5040 crore.
  • Non-existence of accrued interest of Rs 376 crore.
  • Understated liabilities of Rs 1230 crore on account of funds arranged by Raju.
  • Overstated debtors position of Rs 490 crore.
  • Q2 2008-09 revenue was stated as Rs2700 crore as against Rs 2100 crore. Operating profit margin was stated as 24% as against actual 3%.
  • Profit inflated over last several years attained unmanageable levels as company grew.
  • Aborted Maytas acquisition was a last an attempt to fill the fictitious asset with real ones.


How did such a big fraud escape detection?

Didn’t someone in the management notice that a good chunk of the company’s clients, projects and bank balances were actually  missing? SEBI’s investigations show that many of them did. But they either helpfully supported the cover-up or turned a blind eye, deferring to ‘instructions from the Chairman’s office’.

Asked how he could have had no clue about something as basic as Satyam’s bank balances, the company’s ex-CFO, Vadlamani Srinivas, claimed that it was the company’s chairman and managing director who made decisions on investing all surplus cash. They also chose to safe-keep all the bank statements in their office, making them available only when the accounts were prepared.

But didn’t the CFO notice the yawning gap between the bank balances in the accounting system and the ones provided by the chairman’s office? He was too busy with ‘investor relations work’ to look into accounting issues, was his reply. Now we know what CFOs of large corporations do!



  1. Abhishek Gargari said:

    Bramesh Sir as always…unparalled .Fantastic post.. !

    April 10, 2015
  2. Bramesh said:

    Excellent example of how price behavior change the perception of traders.


    April 9, 2015
  3. Harsh Mehta said:

    I remember that day.. Before news came out, I had bought 120 Put at 12/- and had to go visit a doctor. So kept square off order at 20/- (Donno why I did that). As soon as I reached doc, saw the news and stock price had plummeted. I just got nominal profit, but then bought next day morning at 15 and sold around 40s.

    It was good day to remember.

    April 9, 2015
  4. anandchetas said:

    @ Karan

    Something interesting from my side.

    just few seconds before the news came on Satyam, I look at the chart, it was trading around 250-260 level, if i remember correct.

    Then Udyan in CNBC started reading a note, which first read, Raju resigns. i thought it as good news and went long 6000 qty. Then as he started reading the letter, it became clear it was a fraud case. I immeditely squared of and had a loss of 2 lakhs or so. i wanted to short, but my trade tiger hanged, may be due to huge order flow.

    I logged back and went short in the stock, i think around 230. but poor me, i squared off for 10rs profit or say. only after some time i realized the huge impact of the issue. So i bought 2800 pur in nifty and made some of losses back. Still went with 1 lak loss that day.

    Tried to buy satyam the next day, by putting order at 2 rs. But it came only till 10, though low showed was around 5, i saw 10 on the screen. I did not buy even at 20. The day before i bought for 250 levels, next day did not buy at 20.

    I was not trading stock options back then, had a great chance , but missed. but lucky the longs did not burn my account

    April 9, 2015
  5. sundaram said:

    Excellent bramesh

    April 9, 2015
  6. Mukul said:

    Auditots firm is PWC ,American . Let’s wait & watch reation from US authorities also.

    April 9, 2015
  7. karan said:

    The day I could never forget. A day how a huge fortune I could have made – On the day of collapse, I was working at Infosys and was about to go to office but then news flashed about Satyam and could see stock started falling more than 20% from 240 levels. Immediately I opened the chart in my laptop and could see its hitting days low again and again. Satyam was trading in futures and options at that time. I was hesitant to short as the stock has already fallen more than 20% , and PUT options strike was only till 120 I guess. And 120 PUT option was trading at .50 paise or Rs.1 or 2 rupees only.

    Since I couldnt pull the trigger at that time, I left to office and when I checked the news in the evening. Satyam was closed around 40Rs. My Gosh.. 240 to 40 in one trading session.

    A session/chance/event that you would witness once in a life time. If I had pulled the trigger on that day, I would have definitely made enough money to clear all my debts at one shot.

    This learning has stuck deep in my heart, and I made decent money when similar incident happened with Financial Technologies/MCX, Jindal Steel where the stock crased more than 25% in one trading session

    April 9, 2015
  8. Bramesh said:

    Thanks Sir !!

    April 9, 2015
  9. Very good compilation. It was not only the CFO or the people who provided manufactured ‘confirmation of bank balance’ certificates (said to be issued by the respective banks) or Raju himself who indulged in breach of confidence and trust. The AUDITOR of the company was the worst of the culprits. He must have known everything and active co-conspirator. On the day Raju was arrested, I felt bad that the auditor must also be arrested. He was two days later.
    Thanks for bringing the memories back.

    April 9, 2015

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