Satyam stock tumbles as chairman Raju resigns after admitting huge fraud (Second Lead)January 7th, 2009 - 2:44 pm ICT by IANS
Hyderabad, Jan 7 (IANS) Shares of Satyam Computer Wednesday crashed by over 72 percent to Rs.50 from a opening of Rs.179.10 on the bourses around 1 p.m., following the resignation of its founder-chairman B. Ramalinga Raju after he admitted to a Rs.40 billion (Rs.4,000 crore or $823 million) fraud - the largest in India Inc.Satyam’s managing director B. Rama Raju also quit, three days before the re-scheduled board meeting here Jan 10. The resignations caught the market, investors and analysts by surprise.
While resigning, Ramalinga Raju also admitted to a fraud being committed to the tune of Rs.40 billion (Rs.4,000 crore or $823 million) in the balance sheet of the company.
In a regulatory statement, Raju said the software services firm had fraudulently incorporated a non-existent cash component and inflated the bank balance to reflect Rs.5,040 crore (Rs.50.4 billion or $1.04 billion) as against Rs.5,361 crore (Rs.53.61 billion or $1.1 billion).
“Ramalinga Raju and Rama Raju shall continue in their position till such time the board is expanded and their continuance is to ensure enhancement of the board,” the company said.
Ramalinga Raju’s resignation is a culmination of the crisis triggered by the management’s aborted bid to acquire Maytas Properties and Maytas Infra for $1.6 billon (Rs.79.2 billion or Rs.7,920 crore) Dec 17 after institutional investors revolted against the controversial deal.
Satyam also informed the stock exchanges that the company had terminated the services of global financial advisory firm DSP Merrill Lynch, which was engaged to advise the board at the reconvened meeting Jan 10.
The Maytas’ deal fiasco also led to the exit of four independent directors from the board in succession over the last weeks.
Global technology research firm Forrester Research sounded its clients Dec 31 that the beleaguered company was heading for a major shakeout or a possible takeover as a consequence of its management’s bid to diversify from core IT business into realty sector by dipping into cash reserves of $1.2 billion (Rs.53 billion/Rs.5,300 crore).