The benchmark index opening 89 points higher from Tuesday’s close registered a massive fall of 825 points in the mid-session trade after the company Chairman Mr B. Ramalinga Raju’s letter, admitting to the company’s hugely inflated balance sheet, was put up on the stock exchanges.
As the Satyam scrip fell 80 per cent intra-day to the Rs 30-level from the day’s high of Rs 188.70, the ripple effect was felt across the entire market.
In perhaps one of Corporate India’s worst unfolding chapters, Mr B. Ramalinga Raju, Founder-Chairman of the $2-billion Satyam Computer Services, dramatically stepped down on Wednesday admitting to faking financial figures of the company to the tune of Rs 7,136 crore, including Rs 5,040 crore of non-existent cash and bank balances.
The startling disclosure by Mr Raju, considered one of the poster boys of Indian IT, jolted the corporate world, investor community, Government and large pool of young professionals, pushing the fourth largest Indian IT company into a crisis, exposing it to acquisitions and leaving the future of 53,000 employees in balance.
On a day of fast moving developments, the Satyam scrip was slaughtered to a low of Rs 39. 95, down by 78 per cent, and several FIIs (which hold nearly 61 per cent) offloaded their shares. The market cap plummeted to Rs 2,705 crore from over Rs 12,000 crore on a single day.
Mr Ram Mynampati, President, was quickly made interim CEO to steer the troubled ship, while Mr Raju would continue till the new board was constituted on January 10.
Stunning his well wishers and investors, Mr Raju revealed the real motive behind the December 16 bid to acquire Maytas companies for $1.6 billion. It was to swap the fictitious cash reserves of Satyam built over years with the Maytas assets. Mr Raju thought the payments to Maytas could be delayed once the Satyam’s problem was solved.
But unprecedented investor outcry, media pressure and highly unfavourable economic conditions played spoil sport to Mr Raju’s plans, leading to his exit.
A beleaguered Satyam Computer Services today suffered blow with three top independent directors quitting.
Mr Vinod K. Dham, Dr Krishna G. Palepu and Prof. Mendu Rammohan Rao resigned, under pressure from several quarters on corporate governance issues.
The resignations come on the heels of Dr Mangalam Srinivasan, the longest serving Independent Director quitting, owning moral responsibility for not casting a dissent vote against the $1.6-billion deal to buy Maytas firms.
Mr Vinod Dham, the father of Pentium chip, who had called for a special board meeting, had said that he would work with the management to enhance shareholder value. While Dr Palepu is a Harvard Business strategy Professor, Dr Rammohan Rao is the Dean of Indian School of Business.
Effectively, the nine-member Board is now reduced to five members – three whole-time directors (Mr B. Ramalinga Raju, Chairman; Mr B. Rama Raju, Managing Director; and Mr Ram Mynampati, President); and two independent directors (Mr V.S. Raju, former IIT Director, and Mr T.R. Prasad, former Union Cabinet Secretary).
Satyam Computer Services, which has been receiving lot of flak following the aborted bid to acquire Maytas Properties and Maytas Infrastructure, has asked the World Bank to apologise to it for harming its interests.
It also asked the Bank to explain the circumstances related to the “Bank’s inappropriate statements” quoted in the media extensively.
The Bank on Wednesday announced that it made Satyam ineligible for eight years to take any contract from it “for providing improper benefits to Bank staff” and “for failing to maintain documentation to support fees charged for its subcontractors.”
The decision was taken following allegations of data theft in a project handled by the Hyderabad-based software solutions company, Fox News had reported in the morning.
“An anonymous World Bank spokesman conceded Satyam was suspended in February, declared a ‘non-responsive vendor’ and then ‘made ineligible to be a bank corporate vendor’ until 2016,” it said.
It, however, said that currently Satyam’s name was not included in the list of debarred firms on the World Bank’s site.
Satyam Computer tanked as much as 33 per cent and witnessed its 52-week-low level on bourses in early morning trade amid the company calling off its $1.6-billion deal to acquire two infrastructure businesses promoted by the IT major Chief Ramalinga Raju's son.
Satyam at Rs 200, a fall of nearly 12 per cent in the early trade on the Bombay Stock Exchange. The scrip lost further ground and tanked as much as 30.75 per cent to touch an intra-day low of Rs 156.85.
Similar trend was witnessed on the National Stock Exchange where the scrip opened on a weak note at Rs 214.90, then dipped further to witness an intra-day low of Rs 151, a fall of 33.35 per cent from its previous closing price.
