Time makes some people and ruins others. Nifty 50 has the top 50 companies of the country but today we are going to tell you about a company that was a part of Nifty 50 but now no trace of it exists.
The name of this company is Satyam Computer Services.
Collapse of Satyam Computer Services:
Satyam was a leading IT company that was part of the Nifty 50, but collapsed in 2009 due to a massive corporate scandal. Its founder, Ramalinga Raju, revealed fraud in the company’s financial documents, which involved misappropriation of over Rs 7,000 crore. Satyam’s shares fell sharply following the scandal, and the company was removed from the Nifty 50.
What happened next?
Later, Satyam was acquired by Tech Mahindra, and it came to be known as Mahindra Satyam. Eventually it was completely merged with Tech Mahindra and Satyam ceased to exist and thus this Nifty 50 company is now in the pages of history. This instance is seen as one of the biggest scandals in the Indian corporate world, which affected not only Satyam, but also the trust in the Indian market.
What was the Satyam scam?
The Satyam scam was one of the biggest scandals in Indian corporate history, which came to light in 2009. It concerned the IT services company Satyam Computer Services Limited, and was perpetrated by the company’s founder and chairman Ramalinga Raju.
Following are the key points of the scam:
1. False financial reporting:
Satyam’s chairman, Ramalinga Raju, manipulated the company’s financial documents for years. He overstated assets such as cash and bank balances on the company’s balance sheet. He misrepresented the company’s revenue and profit to keep the company’s stock price high and maintain investor confidence.
2. Creation of fake companies:
Ramalinga Raju created several shell companies, and through them fake billings and financial transactions of Satyam were done. In the process, he showed fake revenues and profits.
3. Collusion of big audit companies:
A major role in this scam was played by the big audit company Price Waterhouse Coopers (PWC), which audited Satyam’s financial reports and approved them without conducting a thorough investigation. This was an important aspect of the scam because investors rely on audited reports.
4. Investing in real estate:
Ramalinga Raju invested a large portion of Satyam’s money in real estate companies owned by his family. These companies were used to launder the money obtained from the scam.
5. Satyam merged with Mahindra:
After the scam was exposed, the government intervened to save Satyam Computer Services and began looking for a new owner for the company. Eventually Mahindra & Mahindra acquired Satyam and renamed it Mahindra Satyam, which is now part of Tech Mahindra.
outcome:
Following the disclosure of the scam, Ramalinga Raju and his associates were arrested and sentenced by the court. The Satyam scam raised serious questions about the credibility of Indian corporate governance and auditing systems, leading to calls for subsequent reforms. The scam exposed weaknesses in business and corporate regulations in India, and led to the creation of several new regulations to prevent such scams in the future.