The Rise and Fall of Ramalinga Raju
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ICMR HOME | Case Studies Collection
Case Details:
Case Code : LDEN059
Case Length : 19 Pages
Period : 2008-09
Pub Date : 2009
Teaching Note :Not Available
Organization : Satyam Computer Services Ltd.
Area: Ethics in Leadership
Industry : Information Technology /
Software Services
Countries : INDIA
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Please note:
This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.
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Excerpts
Background Note
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Raju was born on September 16, 1954. His father Byrraju Satyanarayana Raju was an agriculturist. Raju did his MBA from Ohio State University and returned to India in 1977. According to him, "I was just back from the US in the late 1970s after completing my business administration and was in two minds on the way forward.
I had all the enthusiasm and passion to do something… of being an entrepreneur. A friend told me about part-time teaching opportunity at the Administrative Staff College of India (ASCI). This really appealed to me. But, in late 1977, over dinner one night, my father told me, 'It is always important to stay focused and to avoid distractions'...
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All Is Not Well With Raju
While Raju had been praised over the years for his vision and leadership, which were the driving force for Satyam's success, he also received some adverse media coverage. It was reported that he had taken a loan of Rs. 5.2 million from the Andhra Pradesh Industrial Development Corporation (APIDC) way back in 1982, to set up Satyam Spinning Mills...
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Raju's Fall Begins
On December 16, 2008, Raju announced that Satyam
planned to use the cash reserves to acquire two companies - Maytas Infra and Maytas Properties.
Maytas Infra was a public, listed infrastructure development company that had been operational for more than two decades.
Maytas Properties was involved in developing residential townships and urban infrastructure. For the six months ended September 30, 2008, Maytas Infra reported revenues of Rs. 7.37 billion and a net profit of Rs. 0.37 billion.
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Raju Confesses to Fraud
However, before Raju could take a breather, on January 06, 2009, DSP
Merrill Lynch announced that it was terminating its advisory agreement with
Satyam. In its communication, it said, "We have terminated our advisory
engagement with Satyam Computer Services Ltd for considering various strategic
options on January 06, 2009...
The Aftermath
After Raju announced that the accounts had been fudged, analysts were able to piece together the real picture behind the abandoned Maytas acquisition. They realized that Maytas' acquisition was an effort to save Satyam, and replace fictitious assets with real ones.
Exhibits
Exhibit I: Satyam Computer Services – Ten Years at a Glance
Exhibit II: Satyam Computer Services – Financial Results
Exhibit III: Satyam Computer Services – Balance Sheet
Exhibit IV: Satyam Computers – Stock Price Chart (March 2008 – March 2009)
Exhibit V: How Satyam Inflated Profits
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