Satyam shares plunge nearly 80%

Satyam Graph

Bangalore: The head of outsourcing firm Satyam Computer Services resigned on Wednesday, disclosing that profits had been falsely inflated for years and sending its shares tumbling nearly 80 per cent.

Click here to read Raju's letter to the Board

India's biggest corporate scandal in memory threatens future foreign investment flows into Asia's third-largest economy and casts a cloud over growth in its once-booming outsourcing sector.

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The news sent equity markets into a tailspin, with the BSE Sensex tumbling 7.3 per cent in a firmer session for world markets and the rupee fell.

Truth catches up with Satyam

Ramalinga Raju, founder and chairman of India's fourth-largest software services exporter, said in a statement that Satyam's profits had been massively inflated over recent years but no other board member was aware of the financial irregularities.

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"If a company's chairman himself says they built fictitious assets, who do you believe here? This has put a question mark on the entire corporate governance system in India," said R.K. Gupta, managing director at Taurus Asset Management in New Delhi.

Rupee sheds gains on Satyam effect

Raju, who founded Satyam more than two decades ago and who took it public in 1991, said about $1 billion or 94 per cent of the cash on the company's books was fictitious.

Satyam interim CEO's letter to employees

The 54-year-old Satyam chairman came under close scrutiny last month after the company's botched attempt to buy two construction firms partly owned by its founders, which Raju said on Wednesday was a final attempt to resolve the problem of the fictitious assets.

'Case being filed against Satyam promoters, auditors'

"It was like riding a tiger, not knowing how to get off without being eaten," Raju, a management graduate from Ohio University, said in his letter, adding he was prepared to face up to the legal consequences.

Five facts about Satyam Computer

The company's difficulties multiplied when when the World Bank, a major customer, barred Satyam from new business, citing "improper benefits" given to Bank officials.

Satyam to be stripped off Golden Peacock Award

"In a bull market people forgot about it (corporate governance)," said Singapore-based Ashish Goyal, chief investment officer at Prudential Asset Management. "In a bear market chickens are coming home to roost, so it gets highlighted at a time like this."

Satyam top brass had to know about fraud: Analysts

Just three months ago, Satyam received a Golden Peacock award from a group of Indian directors for excellence in corporate governance.

Satyam collapse likely to affect investor confidence

By close of trade, Satyam's share value slumped to about $550 million from around $7 billion as recently as last June.

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New York-listd Satyam specialises in business software and back-office services for clients such as General Electric and Nestle.

India's "Enron"

"I think there is no future for this stock. This case for India is similar to what happened to Enron in the U.S.," said Jigar Shah, senior vice-president at Kim Eng Securities.

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"It will not stop at Satyam. Many more companies will come into scrutiny like that. There is a strong possibility investments in India will be affected."

Satyam directors, employees shocked!

The scandal set off a wave of condemnation from Indian market regulators and government officials, and prompted banker Merrill Lynch to terminate its engagement with Satyam.

Will act on Satyam after getting details: Andhra CM

"It's going to impact the Indian outsourcing industry. Customers are going to be concerned about offshoring firms in India," said Sudin Apte, country head of Forrester in the western city of Pune.

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Satyam said it would go ahead with a planned board meeting on Saturday to consider a share buyback following a rash of broker downgrades even after its acquisitions were called off last month.

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