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IL&FS fallout brings back memories of Satyam carnage

MUMBAI: Nearly a decade ago, Ramalinga Raju, then chairman of Satyam Computer Services confessed to a fraud that shook India’s corporate world and its sunrise IT services industry.The IT sector was bracing for the recession in the US, its largest market, that was triggered by the financial crisis. Satyam was India’s fourth- largest IT services companies and had earned a coveted award for corporate governance the same year. Investors were surprised by the merger of Satyam with Maytas, a privately-led real estate firm of his family members. The stock then fell massively. It also unravelled that all was not well with Satyam.Subsequently, Raju admitted he had artificially inflated financial data for many years. Its operating margins was around 3 per cent as against its claim of 24 per cent. Revenues were inflated by around 25 per cent. It was a meticulous fraud that happened under Raju. He had created fake invoices, had the employee number inflated to match the revenues and fake fixed deposit receipts created to reflect bank balance in tune with the fudged numbers.In the January 2009 letter to the market regulator, Raju said that he was “riding a tiger” and did not know when to get off.With India’s image at stake, the Manmohan Singh government took a drastic step of superseding the board and appointing its own nominees – Housing Development Finance Corporation (HDFC) chairman Deepak Parekh, former National Association of Software Services Companies (Nasscom) president Kiran Karnik and former Securities Exchange Board of India (SEBI) member C Achuthan. They met clients, employees and all stakeholders to say that Satyam would be rescued. At the same time, legal action would be taken against Raju and others.By April, the government appointed board led a transparent process that made Tech Mahindra, a unit of Mahindra emerge as the winner to take Satyam. The process helped save Satyam, thousands of jobs at a crucial time for Indian IT and the country’s reputation.66037397

Read more: economictimes.indiatimes.com