Hyderabad, Jan 07: Satyam Computer plunged into a deep crisis, as B Ramalinga Raju resigned as its chairman after admitting to a Rs.65.92-billion (Rs.6,592-crore) fraud and subjected himself to the "laws of land.” He said his last-ditch efforts to fill the "fictitious assets with real ones" through Maytas acquisition failed.
The announcement led to a free fall of the blue chip's shares on the Indian bourses, as institutional and retail investors alike dumped the scrip from the first hour of trading.
"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," Raju said in a regulatory statement, and listed out the 'facts' that led to his decision to quit the company he founded.
"What started as a marginal gap between actual operating profits and the one reflected in the books of accounts has attained unmanageable proportions," said Raju.
"It was like riding a tiger, not knowing how to get off without being eaten," Ramalinga Raju said in a letter to Satyam's board of directors, wherein he listed major financial wrong-doings over the years to inflate the profits.
According to Raju's statement, Satyam had shown an "inflated (non-existent) cash and bank balances of Rs.5,040 crore (Rs.50.4 billion)" over several years. In addition to this, the company had shown non-existent accrued interest of Rs.376 crore, inflated operating profit of Rs.588 crore, and non-existent interest on operating profit of Rs.588 crore for the second quarter.
Raju's stunning admission caught corporate India unawares and confirmed the worst fears aired by World Bank last month about its business practices.
The Washington-based development bank had debarred the software vendor from doing business with it for eight years from September 2008 on the charges of alleged data theft and bribing its officials for the lucrative deals.
Satyam - among India's largest IT companies that are known worldwide alongside TCS, Infosys and Wipro - boasts of a client base of over 600 companies worldwide. The crisis snowballed after Raju made an aborted bid to acquire Maytas Infra and Maytas Properties, two cash-strapped firms run by his two sons, for $1.6 billion to bolster his fictitious assets - a move that enraged investors.
As a result of the biggest corporate scam, Satyam stock crashed to a historic low of Rs.39.95 on the Bombay Stock Exchange (BSE) from the opening price of Rs.179.10, a record decline of 78 percent. A whopping 143,009,827 shares were sold in a matter of six hours.
Satyam’s rout prompted heavy selling in both the BSE and the NSE. The Sensex, which had gained over 688 points in the last four sessions of 2009, tumbled below the crucial 10,000 point level, losing 749.05 points to reach 9,586.88, while the Nifty plunged 192 points.
NSE delists Satyam
Later in the day the National Stock Exchange (NSE) announced it was removing Satyam from its benchmark index Nifty and the IT firm will be replaced by Reliance Capital with effect from January 12.
Satyam would also be removed from various other indices like CNX 100, S&P CNX 500,CNX IT and the CNX Services sector index, the NSE said in the statement.
The changes are to come into effect from January 12.
New York Stock Exchange also halted trading in Satyam Computer at its bourses in the US as well as Amsterdam in Europe, after founder and Chairman Ramalinga Raju disclosed financial bungling at the Indian IT major.
A spokesperson for NYSE Euronext informed an Indian news agency of the measure through an emailed reply.
In pre-market trade in the US, Satyam stock plunged by
over 90 per cent to 0.85 dollars
Satyam Board to meet on Jan 10
Meanwhile, Satyam today said it would hold its Board meeting as scheduled on January 10.
"The Board meeting is on as of now," company spokesperson said over telephone from Hyderabad.
The spokesperson did not respond to a query on who would be chairing the meeting.
Satyam to be stripped off Golden Peacock Award
Satyam Computer Services will be stripped off the Golden Peacock Award -- the very laurel it used for trumpeting its corporate governance norms when the controversy broke out.
"In wake of unfloding events which is most unfortunate, we have decided to take away the award from Satyam Computers. For this purpose the Council of Institute of Directors (IOD) will meet within a day or two," IOD Director (Indian Secretariat) Manoj Raut said.
Satyam Computers was awarded the Golden Peacock Global Award for Excellence in Corporate Governance 2008 by IOD, and the firm was also the winner of the Golden Peacock Award for Excellence in Corporate in 2002.
Is Ramalinga Raju in India or Dubai?
The whereabouts of B Ramalinga Raju, who stepped down as Chairman of Satyam Computer after admitting to financial irregularities, were a subject of speculation late tonight.
A TV channel speculated tonight that Raju may have gone to Dubai, but there was no confirmation.
"We have no idea of where Raju is," a Satyam spokesperson told agencies over phone when contacted.
Raju was also not reachable on his mobile despite several attempts.
Top police sources said that they were not "tracking" Raju as of now and therefore had no knowledge where he is.
Bureau Report with IANS inputs