Today we will see a case study of Satyam Computers, it says “Best Learning is Learning from Other Mistakes” on this Philosophy we have chosen this topic. The company, which was the best software company in India before 2009, which was listed in Nifty and Sensex, how it suddenly fell to the ground. We will study it here, as a software company, Satyam Computer was a good company, which gave good performance in 2000 during the YTK problem of the computer and the country became a great company.
Investing the money of the main company in another company and presenting the financial figure of the company in a big way so that the company’s shares increase in the market and at the same time the founder of the company took out the money by pledging his shares in the market and invested in the property market, which later became the property market. America fell into recession and it was difficult for the founder to show that Satyam computer back, this problem happened with Satyam Computer.
This company made its name internationally, which in 2009 by the letter of Raju Ramalinga to SEBI and the stock market, the company lost crores of rupees to all the investors in a single day, including big mutual funds and financial institutions. The amazing thing was that Satyam Computer was one of the top 5 companies in India and became the leader company of BSE and NSE, which was manipulating and presenting its accounts for many years. Here we are doing a case study of a company, but together we have decided to write this topic to see it as a big lesson for the share market investor.
History of Satyam Computer –
Started in 1987, the company started with a private limited company and soon expanded its work and from software development to software services, the company earned a good name in a few years. In 1992 the company became publicly listed and the very next year will made a different position by doing joint-venture at the international level. The company had 185 company clients out of the top 500 companies in the world and it was a huge achievement.
The company was doing very well in its field, but the problem was different. Ramalinga invested in the construction sector and this proved to be the biggest mistake when the company started investing in many properties.
The founder of Satyam had an idea to cash in on the boom of the property market and put the money raised from Satyam Computer back into Satyam, but the matter got stuck due to the property slump at that time. The progress figures of Satyam Computer were increased so much from the beginning that it grew later and it became very difficult to fill it.
Satyam Computers & Share Market –
The company performed well from the beginning, but something else was going on in the mind of the chairman of the company, it seems, because in both the important stock markets of India, Satyam Computer was not only a software sector in 2008, but also one of the top 5 companies in the country. Was. Most importantly, many stock market experts never found any problem with Satyam’s balance sheet, I find it very surprising.
Because the experienced people of the stock market do not give any advice without checking the fundamentals of the company, but when Satyam Computer himself brought this matter to the world, then it seems very surprising that everyone came to know about this. It is also a matter of amendment that how this thing was left out from their eyes, say the share market or the regulatory authority, because it was a very sad event that India was gritty in the whole world due to such things.
The system has failed to give confidence to the investor about the stock market, making it important that India does not attract more people to invest. Big experts, financial institutions and experts, such things have been happening continuously, but even then the media should say or authority towards the investor or the experts of the market, they have to see that people’s faith in the market remains.
What is a Satyam Computer Scam ? –
Satyam Computer was such a big company in 2008 that you cannot imagine that this scam could happen with this company in which 53000 employees were working. The company’s business was going on in 66 countries of the world, ie the company was working internationally, the company’s stock was running on the New York Exchange of America. According to the statement of the company’s chairman Raju Ramalinga, this scam was of US $ 1.5 billion, which converts to Indian rupees, so this statistic was huge at that time.
The most surprising thing was that the firm that audited the company was an international company named Price Waterhouse Cooper, which was later banned. The company was paying more fees than the market rate to this auditor firm for this accounting manipulation, but the stuttering that the company kept increasing made it difficult for the company to fill the gap later.
After that scam, the government had to make many legal changes so that the image of the country could be improved in the international market and also in the country so that an atmosphere of trust could be created among the people. Had there not been a slowdown in the property market and the money used by Satyam Computer had not sunk into the property, would this scam have come to the fore? This very important question arises before us.
Buying Raju Ramilinga’s Metas property through Satyam Computer was the last attempt to rectify this mistake, which led to a lot of opposition from the board of directors and investors, and finally, he was forced to bring these things in front of the world.
If asked Raju, the founder of Satyam Computers, do you blame yourself? Perhaps his answer would be that he has been made a scapegoat and such things go on everywhere in the market. We all have to think deeply on this because the one who is caught is a thief or a political sacrifice.
Changes in Government Policies after Satyam Computer –
As soon as Raju Ramalinga told this news to SEBI and the stock market, at first the whole market and economy was shocked that what was happening, after that Raju Ramalinga resigned from the post of chairman. Two days after the resignation of the company’s founder, he was arrested on charges of criminal conspiracy, breach of trust, and forgery. The CBI did an investigation at his house at that time and took all the documents found in his custody.
The company authority dismissed the board of directors and new directors were appointed, Tech Mahindra of Mahindra & Mahindra took over the company through this subsidiary, due to which the government was doing damage control work which had shocked the image of India in the world. Was being So that Satyam’s prices in the market could be stabilized and the company’s offices around the world could be controlled, which was later merged completely by Tech Mahindra in Tech Mahindra.
Why was it necessary to do all this in control? Because the company’s customers were world’s well-known companies and that was an important market for India, which the government had to assure. After this scam in the stock market, a lot of changes were made because no one noticed Satyam’s balance sheet, the rules in the stock market were tightened by SEBI. The well-known organization which used to look after the audit of Satyam Computers was blacklisted by the ICA.
Features of Satyam Computer Scam –
- Raju Ramalinga used to keep all these important accounting details in his computer server named “My Home Hub”.
- Raju Ramalinga had created fake bills from the on[time application, he used to withdraw money from Satyam Computer.
- 356 such fake companies were maintained, whose directors were ordinary people working for them, through which Satyam used to manipulate the computer money.
- Why was he withdrawing so much money from Satyam Computer? The important reason for this was that he wanted to take advantage of the boom in the property market, for this he had taken thousands of acres of land in Andhra Pradesh.
- He used to remove the difference by increasing the balance sheet of the company instead of the money that he used to withdraw from the Satyam computer, the aim was to bring that money back to the company as soon as the profit was received from the market and the profit should be kept with him.
- His last attempt was to buy Meytas property through Satyam and increase the amount that Satyam had withdrawn from Satyam and fill the profits shown by Satyam.
- To exaggerate the actual growth of Satyam Computer to increase the share price and then to invest that money in property by pledging its own shares in the market. Before this scam came out, Satyam Computers was one of the top five best company in India.
- Raju Ramalinga, the founder of Satyam Computer, had created a property sector company with the reverse letter of Satyam, in which Satyam used to invest money in the property market.
- Auditors were paid more than the regular fees for manipulating the accounts of Satyam Computer.
- It is surprising that how no one could understand that the accounts are being manipulated for 7-8 years at Satyam Computers.
- Satyam Computers received the International Level Best Management Award just a few months before the scam came out.
- Share Market, SEBI, Financial Institutions, Government Authority, nobody ever got doubts on Satyam’s progress.
- Before investing in the share market, it is better to check the fundamentals than investing on news and other news, which later the experts of the share market learned this.
- After this scam, the Company Regulatory and the Share Market Regulatory Authority made many legal changes so that the investor could know about the working of the company.
- Tech Mahindra took over Satyam Company, which is a subsidiary of Mahindra & Mahindra, which was later merged with Tech Mahindra.
Public Listed Companies in India & Family Businesses –
Most of the educated intellectuals of India work abroad, whether it is Sundar Pichai or the CEO of Twitter, the main reason for this is the family mentality. Most of the business in India run in Proprietorship or Partnership, India’s share market may be much bigger than America and Europe, it has that potential, but family mentality prevents India’s big companies from growing much.
Companies like Google, Apple, it does not run on familyism, it runs on capacity, if we talk about India, then if we see big business groups, then it is an example of libel, whether it is Tata Group or Adani Ambani Group, which does not run on monopoly. It can, but it does not see it by its name.
The reason for taking this subject, despite being a board of directors in Satyam Computer, all important decisions of the company were taken by monopoly, which shows that why many companies in India are running like this cannot be said. The government made the investment open from the open economic system, but foreign investors do not invest much in the companies of India, the root cause of this is the family mentality which keeps the company monopoly which investors are not attracted.
Critical Analysis of Satyam Scam –
As we have seen that in India companies are not run by public companies in a democratic way like it is seen in developed countries. If we see the list of board of directors of all the famous companies of India, then a casteist mindset is seen, we have to change it and the company will have to run with a big vision.
Most of the business people in India prefer to run on a small scale, so that public companies do not develop in India, and whatever established companies run successfully, they mainly run under the shadow of the government. In this era of globalization, if we want to compete with big international companies like Google, Apple and Amazon, then we have to change our ethnicist mindset and pay more attention to modification so that companies can be successful at international level.
Satyam Computers This company was not a small company, it was given a good platform by the government, by the stock market and by the media, which was hollow from inside, and was being run like a proprietorship company. Therefore, under SEBI regulations and international law, if Indian companies have to survive, then the entire structure will have to be changed so that we do not see such big scams in future.
In this way, we have seen in this case study that while making any kind of investment, one should never invest on news and views, its fundamentals should be seen. Secondly, if the founder of Satyam Computers had not failed in the property market, would this scam have come in front of the people. Bankruptcy in the corporate industry is a part of business because it should be seen as an experiment, but while doing business your aim is to cheat people, then it is a legal offense.
This case study learns is that instead of focusing on the development of a substantial company, experimenting on such a large scale in a field with little experience is like committing suicide. In this case, the same would not happen, otherwise the company was performing well in its field, instead of following a simple strategy, the wrong motive ruined the good company.
Despite Satyam Computer’s more than 50000 thousand employees and 185 international clients list, one man’s ambition had pushed everyone into trouble. Transparency of company activities is very important for the investor in a public listed company, so after that we got to see many changes in the Companies Act in India. Big investors started investing cautiously in the stock market. Due to the bad image of India in the world, the flaws in our system still need to be rectified, only then investors will come to India.