The satyam story is now very much public. All the fiasco which started in the morning has taken a lot of twists and turns and has taken its toll in the stock markets and investor confidence a lot. Here we try to produce the resignation letter of B Ramalinga Raju, the Chairman and Managing director of Satyam Computers. He was described how the profits of the company were inflated and many discrepancies occurred in the balance sheet of the company.

It was really tragic and shameful on the part of Satyam Computers to do all these and keep the investors and stake holders in dark for so long. You can check the opening lines and a small snapshot of his resignation letter. You can also download the the whole report from the link below.

To the Board of Directors

Satyam Computers Services Ltd.

From B. Ramalinga Raju
Chairman, Satyam Computer Servcies Ltd

Dear Board Members,

It is with deep regret, and tremendous burden that I am carrying on my conscience, that I would like to bring the following facts to your notice:

1. The balance sheet carries as of September 30, 2008

a) Inflated (non-existent) cash and bank balance of Rs 5,040 crore (as against Rs 5361 crore refglected in the books)

b) An accured interest of Rs 376 crore which is non-existent

c) An understated liability of Rs 1,230 crore on account of funds arranged by me

d) An over stated debtor position of Rs 490 crore (as against Rs 2651 reflected in the books)

2. For the September quarter (Q2) we reported a revenue of Rs 2,700 crore and an operating margin of Rs 649 crore (24 per cent of revenues) as against the actual revenues of Rs 2,112 crore and an actual operating margin of Rs 61 crore (3 per cent of revenue). This has resulted in artificial cash and bank balances going up by Rs 588 crore in Q2 alone.

The gap in the balance sheet has arisen purely on account of inflated profits over a period of last several years (limited only to Satyam standalone, books of subsidiaries reflecting true performance). 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 the company operations grew significantly (annualized revenue run rate of Rs 11,276 crore in the September quarter, 2008 and official reserves of Rs 8.392 crore). The differential in the real profits and the one reflected in the books was further accentuated by the fact that the company had to carry additional resources and assets to justify higher level of operations – thereby significantly increasing the costs.

Every attempt made to eliminate the gap failed. As the promoters held a small percentage of equity, the concern was the poor performance would result in a takeover, thereby exposing the gap. It was like riding a tiger, not knowing how to get off without being eaten.

The aborted Maytas acquisition
deal was the last attempt to fill the fictitious assets with real ones. Maytas’ investors were convinced that this is a good divestment opportunity and a strategic fit. Once Satyam’s problem was solved, it was hoped that Maytas payments can be delayed. But that was not to be. What followed in the last several days is common knowledge.

To read the whole story of this Satyam fraud and B Ramalinga Raju’s Resignation letter click the link. Meanwhile SEBI has taken a major decision of replacing Satyam from Nifty since Jan 12th 2009 and include Reliance capital and a probe has already been ordered into this fiasco.NYSE  has ordered to halt the trading of Satyam Computers stock. The situation is turning out to be really bad.

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