Satyam is the fourth largest Indian It company and it has been known as the one of the best Indian IT companies to work with and it has risen past several companies to bag several projects.

It's revenues were in the range of 10,000 crores a year and has a roster of about 650 clients all over the world who used to offshore their work to Satyam.

10000 crores will mean about 2 billion dollars or rather more based on the valuation of the rupee.

This companies founder is Mr. Ramalinga Raju who in a letter to the Board of Directors said that he has for the past seven years overstated the accounts and that the total profit margin of the company is only 3% even though he has been fraudulently showing a profit margin of about 25%.

That means he was showing a cash at hand I mean in the bank accounts to be 5000 crores about a billion dollars whereas the cash is only 640 crores or even less in the accounts. That letter caused a stir and the jobs of about 55000 employees is at stake as well as the the whole future of the company is at stake.

 Other IT companies especially those operating from Indian IT shores such as Wipro, Infosys and TCS have more revenues than Satyam but the fact is that each of them and even some companies smaller than Satyam have a profit margin of about 25% or so.

Satyam is saying that the profit margin is only 3% which is very hard to believe and hence the big question is where is the money and the reason for overstating the profits and the cash in hand.

The problem is why Satyam has such low profit margins which means that there are more employess than there is work and secondly if indeed the revenue is that much then why the profit margin is less and if it is same as other companies the where did the money go ?

 The auditors internal as well as external should have knowm this . Internal auditors can be hand in glove with the management but what happened to the external auditors as to why they did not suspect something wrong.

In this the case the external auditors were PEC or Price Water House Coopers and that means PwC knew about the farud all along or they did not do proper auditing.

In fact they were paid much more than what other Indian IT companies paid their auditors.

 Golden Peacock award was given to Satyam for its corporate governance standards.

This is the irony of the situtaion that a company which was considered the best in IT industry has such low corporate governance standards. On top it the Board of Directors were not even apprised of even anything.

In fact it seems even the CFO was not sure about a lot of things ! talk about corporate governance.

Corporate Governance as defined is " Corporate governance refers to the legal and factual framework of the management and monitoring of companies. Corporate governance regulations are geared towards transparency and thus strengthen the trust in management and control focusing on value creation" 

Investors generally tend to be more favorable towards the big companies and also tend to put a lot of money into one particular stock and that I believe is very much wrong.

The name of the game is diversification and as a stock market for beginners guide I would say that make sure that you do due diligence for investing in each company as well as make sure that you do not even invest in one stock of the same industry but instead invest in several stocks of each industry.

 The big question is that why such a person would commit such a fraud. The psychologists would of course give a different answer but the only answer is greed.

In this case it ws greed for money as the land price were going high so he and his son opened up a company by the name of MAYTAS and made sure that all the funds were diverted there.

Then he used his political connections to make sure that he got good projects for infrastructure development and that means that he will able to grab more land. In fact he is supposed to be the 10th biggest land owner in the country.

In the end he had to disclose because there was no way he could fund do many projects and also he had pledged his shares in the company to get money but then the stock market tanked and he had no means to do give out more money and hence was left with no option but to disclose.

Wow what fraudster ! India's answer to Enron is here ! ! !