Introduction

Company Type – Public

Established year – 1987

Founders – Ramalinga Raju

Headquarter– Hyderabad, India

Services – IT, business consulting, and outsourcing services

Countries initiated in– India

Defunct– 2013

Mahindra Satyam, formerly known as Satyam Computer Services Limited, was an information technology (IT) services corporation in India. With headquarters in Hyderabad, India, the company provides engineering design services, packaged software integration, system maintenance, and software development. Mahindra Satyam was listed on the Bombay Stock Exchange, the National Stock Exchange, and Pink Sheets and offered services to a broad range of buyers, including 185 Fortune 500 corporations.

Details

In 2009 the corporation's chairman and founder Ramalinga Raju confessed to increasing the corporation's possession by $1 billion, leading to a fall of the corporation's stock rates and criminal charges. Their IT arm, Tech Mahindra, acquired a leading stake in the corporation, and in 2009 the Satyam Computer Services Limited renamed itself Mahindra Satyam. In 2013, Mahindra Satyam integrated with Tech Mahindra.

Reasons behind Mahindra Satyam's Failure

The Mahindra Satyam fraud was a corporate fraud influencing India-based corporation Satyam Computer Services in 2009, in which chairman and founder Ramalinga Raju admitted that the corporation's accounts had been misrepresented. Here are the reasons behind Mahindra Satyam's failure.

Fake economic state

The company falsified its reports both to its investors, regulators, stock exchanges, board, and all other shareholders. It is a scandal, which misrepresented the market and other shareholders by telling an untruth about the corporation’s economic state. Even basic truths such as cash balances, interest liabilities, operating profits, and revenues were grossly increased to show the corporation in a decent state.

Fake bills and invoices

Fake bills and invoices were generated utilizing software apps such as 'Ontime' that were utilized for evaluating hours added by a worker. A secret plan was purportedly created in the source code of the authorized invoice managing system generating a user id 'Superuser' with the leverage to show or hide the statements in the system.

Web of companies

A network of 356 investment corporations was utilized to allegedly take away funds from Mahindra Satyam. These corporations had numerous deals in the form of loans, advances, inter-corporate investments, etc. One such corporation, with a recompensed equity of Rs 5 lakh, invested Rs 90.25 crore and obtained unguaranteed loans of Rs 600 crore.

The capital increase was utilized to acquire many thousands of acres of property across Andhra Pradesh to operate a growing realty market. A growing issue was presented by it as truths had to be fixed to keep displaying decent dividends for Mahindra Satyam that was evolving in scale and size.

Conclusion

The Satyam affair highlighted the significance of ethics and its connection to corporate culture. Satyam's founders' deception demonstrates that "the science of conduct is affected in large part by human avarice, ambition, and craving for power, money, fame, and glory." Scandals and frauds of many kinds have demonstrated the need for ethical behavior.

Key learning

White-collared frauds like these not only make the corporation look guilty but also the nation and the business. The Corporate Governance framework should be enhanced and then executed in the letter as well as in the right spirit. Even though corporate administration strategies cannot prevent fraud activity by top leadership completely, they can work as a means of observing such fraud activity.