NEW DELHI: Ramalinga Raju, founder and chairman of India’s fourth-largest software services provider Satyam Computer Services Ltd., resigned yesterday saying he falsified earnings and assets, prompting Satyam’s shares to drop by 80 percent.
In his resignation letter, Raju said the Rs.5.4 billion ($1.04 billion) of the Rs.53.6 billion in cash the company reported at the end of its second quarter ending in September were nonexistent.
“What started as a marginal gap between actual operating profit and the one reflected in the books of accounts continued to grow over the years. It has attained unmanageable proportions as the size of company operations grew,” Raju stated. Raju’s revelations sent jitters in India’s stock market. The company has been listed on New York Stock Exchange since May 2001 and Euronext since January 2008. Satyam shares plummeted 77.69 percent, or Rs.139.15, to Rs.39.95 on the Mumbai Stock Exchange yesterday, as investors dumped the company.
The broader benchmark 30-share Sensex plunged 7.25 percent to 9,586.88.
The company’s financial position had been massively inflated during the course of the company’s expansion from a handful of employees into an outsourcing giant with 53,000 employees and operations in 66 countries, Raju revealed.
In the capital city, Corporate Affairs Minister P.C. Gupta said the government would refer the case of financial bungling to the Serious Fraud Investigation Office (SFIO). “The case would be referred to SFIO once facts are verified. If they are genuine then it is shameful,” Gupta said, adding that if the financial bungling is proved correct, stern action would be taken.
Satyam has been under the scanner for some time following a report that the company had been banned from World Bank contracts for installing spy software on World Bank computers. Although World Bank confirmed last month that Satyam had been banned, it did not give any reason.
In December investors protested strongly against the company’s proposal to buy two firms with ties to Raju’s sons.