Satyam fraud shocks investors, employees (Lead)January 7th, 2009 - 5:27 pm ICT by IANS
Hyderabad, Jan 7 (IANS) Satyam Computer founder-chairman B. Ramalinga Raju’s disclosure of committing a Rs.40-billion ($823-million) fraud has shocked corporate India, especially the investors and over 50,000 employees of the country’s fourth largest IT services company.The corporate world was astonished when Ramalinga Raju quit after confessing to the fraud that had been going on for years.
“It is shocking. While we were sensing some trouble ever since the management decided to acquire two companies owned by his family members, we never imagined that the fraud would be on this scale and the chairman himself will admit it,” said a shareholder.
There was panic among Satyam employees as they faced an uncertain future. They were seen discussing the developments among themselves at Satyam development centres here.
Ramalinga Raju’s resignation along with that of managing director B. Rama Raju came a day after over 100 employees of the company quit their jobs, fearing trouble.
The latest developments could force more employees to hunt for jobs in other companies. Satyam has nearly 53,000 employees and development and delivery centres in India, the US, Canada, Brazil, Britain, China, Hungary, Egypt, United Arab Emirates, Malaysia, Singapore and Australia.
The firm delivers consulting, system integration and outsourcing solutions to over 690 clients, including 185 Fortune 500 companies in 65 countries.
Besides the company shareholders and employees, this key IT hub was also jolted with companies fearing wider ramifications for the entire sector in Hyderabad.
Since Satyam was considered a brand ambassador of Hyderabad, the companies fear that it could have an impact on the business as a whole and hit their orders.
“The companies operating out of Hyderabad will be looked at with suspicion and the number of orders might also come down,” said a top executive of an IT services firm, who did not want to be named.
Ramalinga Raju was once considered the pride of Andhra Pradesh. Now the fraud he has admitted to has badly shaken all industrialists in the state.
“I was one of the greatest fans of Ramalinga Raju, but today I am very upset,” said Harish Chandra Prasad, vice-chairman of the Confederation of Indian Industry (CII), Andhra Pradesh.
“This is the saddest say for investors. The fraud has badly shaken their confidence in India Inc. and it is very difficult to restore their confidence,” said market analyst C. Kutumba Rao.
He said the manner in which Satyam tried to acquire Maytas Infra and Maytas Properties had raised doubts in many minds. “There was something behind the move. It was a desperate attempt by Ramalinga Raju, but nobody had imagined that the company had committed such a huge fraud,” he said.
Referring to the sharp fall in Satyam shares, he said it was a natural reaction by the investors. “Satyam’s share today is not even worth Rs.10,” he said.
The crisis in Satyam was triggered by the management’s aborted bid to acquire Maytas Properties and Maytas Infra for $1.6 billon (Rs.79.2 billion) Dec 17.