'Satyam' means 'Good' in Sanskrit but the act of the company was just oppsite to its name.
The financial crisis has brought a dark day to India. The chairman of Satyam Computer Services Ltd, the country’s fourth largest software exporter, has resigned after a margin call forced him to admit defrauding investors for years by fiddling the accounts. B. Ramalinga Raju controlled just 8% of the prestigious family business. But like New York’s $50 billion (Rs2.4 trillion) Ponzi-scheme fraudster Bernard Madoff, it appears to have been easy for this respected businessman to commit his crime. After years of vastly inflating profits, it turns out Satyam isn’t a rapid-growth bellwether of India’s flagship industry. The reality is shocking. Satyam’s operating margin wasn’t the 24% as shown in its accounts audited by PricewaterhouseCoopers, but just 3%. And Satyam had nothing close to the reported Rs5,360 crore ($1.1 billion) cash pile on its balance sheet. The real amount was just a measly $78 million. The Satyam fraud has unravelled rapidly. Alarm bells first sounded last month when the IT software firm tried to buy two construction companies in which the founder also held stakes. Investors vetoed the deal and Satyam shares fell sharply. That appears to have triggered a deadly margin call on a $1 billion loan against shares—and the first reduction of Satyam’s founder’s holding in eight years. Unlike Madoff, Satyam’s founder claims he hasn’t benefited financially from the fraud. But his deceit appears to have been born out of a similar type of greed: for prestige and business accolade in close-knit Indian business circles. Depicting himself as a man consumed, Raju claims what started off as an attempt to cover a marginal discrepancy simply swelled to a deceit of “unmanageable proportions”. Satyam’s revelation is a big blow to confidence in Indian capitalism. Leading family conglomerates have already had a tough year—poor performance and acquisition choices have seen confidence falter in both the Tata and Reliance business empires. The Satyam fraud will further erode faith in the whole Indian model of capitalism, which is largely dominated by family-run conglomerates. Satyam’s disgraced chairman described the growing fraud as “like riding a tiger, not knowing how to get off without being eaten”. The same sentiment applies to too much of the financial boom, in India and elsewhere.