"Nuclear" explosion by Satyam

Phew..! What a day it has been for India Inc. There been many groundbreaking days in recent past and today was yet another one, yet on a totally opposite sentiment than the other ones..!

Satyam Chairman and Managing Director Mr Ram Raju writing a bold letter to The Board confessing all the wrongdoings and inflated accounting books. Here is a piece from an article on Business Today:

"Here are the reported facts. Satyam is a publicly listed company in India and in the US. Its promoters, led by Mr Ramalinga Raju, own 8.74 per cent of the shares of the company. The public owns almost 72 per cent of the stock, of which 48 per cent is held by foreign institutional investors (FIIs) and 12.9 per cent by Indian public financial institutions (FIs). This is what Satyam's management and promoters proposed. A group representing only 8.74 per cent of the stock, wanted to use $1.6 billion of Satyam's free cash to buy 51 per cent of Maytas Infra for $1.3 billion, and 100 per cent of Maytas Properties for $300 million. Maytas is Satyam spelled backwards; and over 36 per cent of Maytas is owned by Raju's family, led by his sons Rama Raju and Teja Raju. Let's assume that the valuations were right. Even so, this was a massive related party transaction. In effect, persons representing a mere 8.74 per cent of a listed entity were proposing to transfer a whopping $1.6 billion of the company's cash to pay related promoters (i.e., themselves) of another company."

There has been lot of questions raised about the Independent Directors as well.But above all the question I have is how a leader of the company can get away with such huge manipulations without the knowledge of senior management? What is the credibility of the clean-chit given by Mr Raju to all members of senior management? I am no expert in these matters so I can't answer these questions, but would seriously like to know the answers.

What I can say is its a big blow to the India Inc and especially IT industry as the credibility and trust that they have won over long time is in question. I hope SEBI and other regulators take serious actions and made required regulatory amendments to prevent this from happening again. However, I am pretty confident that this will happen and will happen quickly.

Above all, I think the most important thing for all of us to look at is the ethical and moral grounds on which we base our corporate growth. We certainly don't want to be another USA where there are so many people for whom all that matters is bottom line figures, and not how that is achieved.