Mr. Ramalinga Raju, Chairman of Satyam Computers, which is/was a very respected name in Indian IT industry has in public confessed to have forged companies account to show higher profits over the years. Mr Raju has accepted that 50.4 billion rupees ($1.03 billion) of the 53.61 billion rupees of cash and bank balances the company reported on Sept. 30 were non-existent. [Source] Words of shame really,from mouth of a man who founded this company in 1987,named it Satyam (means “truth” in Sanskrit,talk of irony  now), made it the 4th largest IT company in India.

Mr. Raju has admitted that he showed more profits than there actually were. They kept on forging the companies accounts book hoping that their company has a sound base and they will be able to cover up the deficit in the next quarter/year. But that dint happen. He then tried to buy two companies of his son so that he could relate the difference in profits to purchase of those firms and fool everybody, but due to a strong negative reaction by the investors, he was forced to let go his plan. Seeing no escape, as a last resort he confessed the scam. Mr. Ramalinga Raju has now resigned.

Lets see how big Satyam is. Satyam boasts of names like ArcelorMittal, the world’s largest steelmaker, and Nissan Motor Co., Japan’s third-biggest carmaker as its customers. Satyam is a huge company,employing more than 50k people. I cant imagine what those 50k people would have felt when they heard this news. The investors who trusted in the company lost their money to the cumulative tune of thousands of crore of Rupees. Foriegn investors will now think hard before investing in an Indian firm. Volume of jobs being outsourced to India can also be affected. All this can hit India’s booming economy real hard.

From a student point of view also, this spells disaster. In this time of grave economic crisis,recuitments were already down. God forbid, if company does dissolve, 50k will go somewhere. These already well trained workers will be readily absorbed first by the other companies which could result in further decrease in recuitments. (I will be un affected as I am not related to Satyam’s field of work as I am doing Biotechnology.Though I am not sure there ever will be any recuitments of Biotech students.hehe.)

It is such a huge blow to Indian corporate world that you can safely name it “Enron of India.” You cant think of a possible reason or excuse how and why a scam of this magnitude go un noticed for so long. This shows how good our corporate governance is. How was he paying his taxes if he was just inflating his profits. How was he paying his employees? Its hard to accpet that he was alone in the plan.
Satyam has been removed from important indexes like BSE (Bombay Stock Exchange) and NSE (National Stock Exchange).[Source] Yesterday,when Mr. Raju disclosed this scandal,Satyam Computers’s stock plunged by about nearly 80% in BSE Sensex.

Whatever steps are taken here after,this incident has all what it takes to shake Indian economy to its roots, more so because of its timing. Though, steps should be taken so that these criminal acts are not repeated in future and so that confidence of investors can be re-instated in Indian corporate world. And ideal start to this would be getting Mr. Raju behind the bars. This itself is not a tough job as influential eople in India do not find themselves in prison very often, but doing it this time will set an example for others that,who ever you are,if you break the law,you will be punished.