How did Raju manage to achieve a scam of such a large scale in a company which was so closely scrutinised as India's success story, especially in the IT sector?
Over six years ago, in January 2009, India Inc has hit by its biggest scam ever -- the Satyam Computers scam. At the centre of it all was the much celebrated entrepreneur who had the perfect rags-to-riches story -- Ramalinga Raju.
After over half a decade of jostle, the special court in Hyderabad is expected to announce its verdict today. The story of a blue-eyed boy's journey to create a blue-chip company that encapsulated the story of new India in the post-liberalisation era had entralled everyone. Maybe that was the reason why no one suspected Raju and his underlings of any wrongdoing.
The case clearly marks a watershed year in Corporate India and exposed the perils of capitalism and the baggage it brings with itself. Free market ideology made Alan Greenspan the celebrated Federal Reserve chief and the subprime crisis was its byproduct. What the Enron scam is to the US, Satyam became to India.
How did Raju manage to achieve a scam of such a large scale in a company which was so closely scrutinised as India's success story, especially in the IT sector?
It all started with Raju's love for land and that unquenchable thirst to own more and more of it.
Ambition and risk ran in cahoots with his goals, mated with Maytas (nothing but Satyam when read from right to left), was an infrastructure company owned by Raju's sons, was a perfect recipe for disaster.
So perfect was the scam that no auditor or analyst could even figure it out till Raju admitted to the massive irregularities in his self-confession. The trigger was obviously the failed attempt to merge Maytas with Satyam.
An IT company buying an infrastructure company was never going to go down well with investors but Raju tried. It was his last bid attempt to hide what he had done. But this just opened the pandora's box.
So high Raju aimed that during pre-crisis era, Raju had set a target for Satyam to achieve $12 billion turnover by 2012. TCS, India's top IT firm had revenues of $13.4 billion in 2014.
Raju was an astute businessman who, unlike Infosys till recently, devolved all important management functions in Satyam to professionals but finance.
Satyam's finances were a black-box with an access card so rare that only Raju and his confidants knew what exactly was going on in the company. “This man does not belong in jail. He belongs in a mental institution,” quipped DA Somayajulyu, adviser to the Andhra government on economic affairs and policy implementation in 2009.
Ganesh Natarajan of Zensar Technologies famously said, “If anybody in the industry is capable of pulling off a scam like this, it would be Ramalinga Raju…the capability, the thinking through, the planning of such a large operation….only he had the ability to pull it off."
Also Read: The strange case of Ramalinga Raju The biggest name in Indian IT goes for scrap
At its peak market capitalisation, Satyam was valued at Rs 36,600 crore in 2008. Just a year later, the scam-hit satyam was snapped up by Tech Mahindra, promoted by Anand Mahindra, for a mere Rs 58 per share -- a market cap of a mere Rs 5600 crore.
The stock that hit its all-time high of Rs 542 in 2008 crashed to an unimaginable Rs 6.3 on the day Raju confessed on January 9, 2009.
Also Read: Satyam goes for just one-tenth of pre-scam price
The scam
It took nearly two years and over 100 experts to assess the total damage of the scam perpetrated by Raju. The final figure was a shade under Rs 8,000 crore.
Satyam had tried to buy two infrastructure company run by his sons, including Maytas, in December 2008. The effort failed and in January 2009 Raju confessed to irregularity on his own and was arrested two days later.
He admitted to faking revenues, clients and even profits. CID told the court that Raju even falsified number of employees in the company by 13,000 and pocketed the money spent as salaries for these non-existent employees.
Raju faked 7561 invoices which raked up fake revenues to the tune of Rs 5117 crore and raked up fake cash worth Rs 3983 crore. He tampered with the invoice management software to give birth to this massive scam which is worth Rs 7900 crore in its totality.
Also Read: 7,561 fake bills = Rs 5,117 cr ‘sales’
The government swung into action and tried to salvage what was left of the beleaguered IT major. Deepak Parekh, chariman of HDFC was appointed as chairman of Satyam's board. Kiran Karnik of NASSCOM and C Achuthan of SEBI were other members chosen to steer Satyam out of its mess.
A year later, Satyam was auctioned and many companies showed interest in buying it for a price which was nearly one-tenth of its all-time high.
Tech Mahindra emerged as the winner in 2009.
Vineet Nayyar, who was appointed Satyam's chairman then, said that the process of reinstating accounts and finding the magnitude of the irregularities was "torturous".
Also Read: Satyam finally figures out Raju scam damage: Rs7,855.3 crore
The case
Accused in the case, including Raju, were charged with cheating, criminal conspiracy, forgery, breach of trust, inflating invoices, profits, faking accounts and violating number of income tax laws.
CBI has filed three charge-sheets in the case which were later clubbed into one massive charge-sheet running over 55,000 pages.
Over 3000 documents and 250 witnesses were parsed over the past 6 years.
As the judge reads his verdict on Monday, it remains to be seen whether the scam that shook India and the private sector for its sheer magnitude and brought to dust the edifice of India Inc will finally get its much deserved closure or not.
First published on March 9, 2015
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