Case 44: Satyam Computer Services (India, 2009)

• Prof. Dr. Klaus Henselmann
• Dr. Stefan Hofmann

Before he fell from grace, Ramalinga Raju was hailed by investors as a visionary who shepherded his company, Satyam Computer Services, to post profit margins exceeding 20% every year. He was once considered “the pride of Andhra Pradesh” (his home state), and Satyam became a brand ambassador of Hyderabad (the southern Indian city where the company is based). But in January 2009, Raju had to admit to the largest corporate fraud in Indian history. In a letter to Satyam’s board of directors, he confessed to vastly inflating profits “for years” with fictitious assets. Raju said that (among other things) USD 1.04 billion, or 94% of the cash/bank balance at the end of the company’s second quarter in September 2008, was nonexistent. The announcement sent shock waves across Corporate India, and the scandal was quickly labelled as “India’s Enron”. “This is the saddest say for investors,” said one market analyst. “The fraud has badly shaken their confidence in India Inc., and it is very difficult to restore their confidence.”

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