Satyam Scandal Explained | Satyam Scam in Hindi

Summary

The video script narrates the Satyam Scandal, one of India's biggest corporate frauds. It details the extravagant lifestyle of Mr. Raju Ramalinga Raju, who was once revered as 'Andhra's Bill Gates.' The narrative unfolds his journey from a failed restaurant business to founding Satyam Computers, which he later used as a front for a massive scam. The script delves into his manipulation of financial records, insider trading, and the eventual market panic that led to his confession. It concludes with the aftermath, including the impact on shareholders, employees, and the eventual acquisition by Tech Mahindra, underscoring the importance of due diligence in corporate governance.

Takeaways

• 😎 The individual discussed in the script led a luxurious lifestyle with numerous designer shirts, shoes, and luxury cars, and was often seen traveling to exotic locations.
• 💼 Known as 'Andhras Bill Gates,' he was an inspiration for many, especially the youth, and was frequently invited to speak at colleges.
• 📉 The script describes a sudden drop in the value of shares of a company, causing panic and financial loss for those who had invested in it.
• 🚨 The individual confessed to a 24-year-long scam, which was previously undetected and caused a significant impact on the market.
• 🏢 The company Satyam Computers was started in 1987 and initially had success, particularly during the Y2K crisis when it provided solutions to prevent computer system failures.
• 🏗️ A sister company, Maytas, was created for construction and real estate, with plans to use Satyam's profits to cover Maytas's losses.
• 💼 The scam involved creating fake companies and accounts to circulate money, inflate profits, and manipulate share prices.
• 📉 The 2008 financial crisis and a drop in real estate values exposed the fraudulent activities and led to a confession by the individual.
• 🔍 The script highlights the importance of due diligence and skepticism when evaluating the success and legitimacy of companies and their leaders.
• 💡 The Satyam Scandal serves as a cautionary tale about the dangers of blindly following market hype and the need for investors to conduct fundamental analysis.

Q & A

What was the significance of the Y2K problem for Satyam Computers?

The Y2K problem, where there was a fear of a global computer crash due to date system issues, provided Satyam Computers with a breakthrough opportunity. Their team of engineers successfully found a solution to prevent the crash, which significantly increased their fame and credibility in the market.

How did Mr. Raju Ramalinga Raju's early business ventures fare before founding Satyam?

Mr. Raju Ramalinga Raju's early business ventures, including a restaurant business and a cotton business, did not run successfully. He also joined the construction business, which similarly did not perform well.

What was the role of Maytas in the Satyam scandal?

Maytas, a company formed by Mr. Raju, was used to conduct all the fraudulent activities. It was involved in money circulation through over 340 small companies, buying properties, and inflating profits to manipulate the market.

How did Satyam Computers manage to acquire a large number of Fortune 500 companies as clients?

Satyam Computers managed to acquire Fortune 500 companies as clients by successfully addressing the Y2K problem, which showcased their technical expertise and reliability, leading to increased trust and business from major corporations.

What was the strategy behind inflating profits and share valuations at Satyam?

The strategy was to create a perception of exceptional performance by Satyam, which would attract shareholders to buy shares, increasing their value. The inflated share prices were then used to buy properties, with the intention of profiting from the historically rising real estate market.

How did the global financial crisis of 2008 impact Satyam's operations?

The 2008 global financial crisis led to a depression in the real estate market, causing a significant drop in land prices. This negatively impacted Satyam's strategy of inflating profits and using the proceeds to buy properties, as the value of the properties they had acquired decreased.

What was the role of the MIS system in the Satyam scandal?

The Management Information System (MIS) at Satyam was manipulated by Mr. Raju to falsely report profits and other financial metrics. This system was used to deceive both internal departments and external stakeholders about the company's financial health.

Why did Mr. Raju Ramalinga Raju confess to the fraud?

Mr. Raju confessed to the fraud after realizing that the scheme could no longer be sustained, especially following the 2008 financial crisis and the failure of his attempt to merge Satyam with Maytas. His confession was a last resort after his plans to salvage the situation through various means had failed.

What was the aftermath of the Satyam scandal for its employees and shareholders?

The Satyam scandal resulted in a significant loss for shareholders, many of whom were inspired by the company's glamorous image. Employees were saved as the company was eventually acquired by Tech Mahindra, but the scandal led to a loss of trust in the market and highlighted the importance of due diligence in corporate governance.

How did the Satyam scandal affect the auditing and corporate governance practices in India?

The Satyam scandal led to a reevaluation of auditing and corporate governance practices in India. It highlighted the need for stronger regulatory oversight and more transparent financial reporting. The scandal also led to penalties for the auditors involved and increased scrutiny of corporate governance structures.

Outlines

00:00

💼 Satyam Scandal Introduction

The script begins with a conversation between Vinod and Deepak Kalal, who discuss the luxurious lifestyle of a man with an extensive collection of designer shirts, shoes, and luxury cars. This man, referred to as 'Andhras Bill Gates,' is a youth icon and an inspiration for many. However, the conversation takes a dramatic turn when Deepak discovers that the man's company's stock value is plummeting due to a confession letter revealing a 24-year-long scam. The man behind the scandal is identified as Mr. Raju Ramalinga Raju, who was once celebrated for corporate governance and is now the center of the country's biggest corporate scandal.

05:06

🌐 Satyam's Rise and Y2K Opportunity

The narrative shifts to the early life of Mr. Raju, who after completing his MBA from Howon University, ventures into various businesses including a restaurant, cotton, and construction. Inspired by Dhirubhai Ambani, he enters the IT sector and establishes Satyam Computers in 1987. Satyam gains prominence during the Y2K crisis, where the company's engineers successfully prevent a global computer crash, leading to significant business growth. However, the script hints at dubious financial practices, including the creation of MAYTAS, a company used for illicit activities, and the manipulation of Satyam's financial records to inflate profits.

10:10

📉 The Downfall of Satyam

The script delves into the fraudulent activities within Satyam, detailing how Mr. Raju and his associates used a network of shell companies and falsified financial records to inflate the company's profits and stock value. The scam begins to unravel as the 2008 financial crisis impacts the real estate market, causing a significant drop in land values and exposing Satyam's overinflated financials. Mr. Raju's attempts to merge Satyam with MAYTAS to cover up the fraud fail, leading to his eventual confession and the collapse of Satyam's stock value.

15:15

🔍 Lessons from the Satyam Scandal

The final paragraph reflects on the aftermath of the Satyam scandal, highlighting the impact on shareholders and the public. It discusses the consequences faced by the company's auditors and the eventual takeover by Tech Mahindra, which saved Satyam's employees but resulted in significant losses for investors. The script concludes with lessons learned from the scandal, emphasizing the importance of fundamental analysis and skepticism towards overly hyped investments. It also promotes an upcoming course on investment and trading and invites viewer engagement through likes and comments.

Keywords

💡Satyam Scandal

The Satyam Scandal refers to a major corporate fraud that took place in India involving Satyam Computer Services, once one of the country's largest IT companies. The scandal is central to the video's narrative, illustrating how the company's chairman, B. Ramalinga Raju, confessed to a multi-year financial fraud that inflated the company's revenue and profits. The video discusses the scandal's impact on the company's share price, employees, and shareholders, highlighting the consequences of corporate governance failures.

💡Corporate Governance

Corporate governance pertains to the system of rules, practices, and processes by which a company is directed and controlled. In the context of the video, the lack of effective corporate governance at Satyam allowed the fraud to occur undetected for years. The video emphasizes the importance of robust governance structures to prevent such scandals and protect investor interests.

💡Share Price

Share price is the cost at which a share of a company's stock can be bought or sold at any given time. The video script describes how the revelation of the Satyam Scandal led to a dramatic drop in the company's share price, from Rs 158 to Rs 6.50, illustrating the direct financial impact of corporate scandals on investors.

💡Insider Trading

Insider trading involves the buying or selling of a public company's stock by individuals with access to non-public information about the company. The video mentions that B. Ramalinga Raju engaged in insider trading, using his knowledge of the company's true financial state to make profitable trades before the scandal broke, which is illegal and unethical.

💡Accounting Fraud

Accounting fraud is a deliberate misrepresentation of a company's financial information, typically to make the company appear more profitable than it actually is. The video explains how Satyam's management, led by Raju, engaged in accounting fraud by inflating revenue and profits, which was a key component of the scandal.

💡Y2K

The Y2K (Year 2000) problem, also known as the Millennium Bug, was a major issue at the turn of the 20th century concerning the handling of dates in computer systems. The video notes that Satyam gained significant business and reputation by successfully addressing Y2K issues for its clients, which was a turning point for the company's growth.

💡Real Estate

Real estate refers to land and the buildings on it, which can be bought, sold, or developed. In the video, it is mentioned that Satyam's fraudulent activities were partly channeled into the real estate market through the Maytas group, with the intention of inflating the value of properties to offset the company's financial discrepancies.

💡Management Information System (MIS)

An MIS is a computerized system used to collect, analyze, and disseminate information to support decision-making in an organization. The video describes how Satyam's MIS was manipulated by Raju to create a false picture of the company's financial health, hiding the extent of the fraud from both internal and external stakeholders.

💡Lehman Brothers Crisis

The Lehman Brothers Crisis was a major financial event in 2008 when the investment bank Lehman Brothers filed for bankruptcy, triggering a global financial crisis. The video connects this crisis to the Satyam Scandal, explaining that the subsequent global economic downturn affected the real estate market, making it harder for Satyam to sustain its fraudulent activities.

💡Bidding War

A bidding war occurs when multiple parties compete to acquire a company or asset, driving up the price. The video concludes with a discussion of the bidding war between L&T and Tech Mahindra for Satyam, which ultimately led to Tech Mahindra acquiring Satyam and saving the company from collapse.

💡Fundamental Analysis

Fundamental analysis is a method of evaluating a security or a company by examining its financial statements, management, competitive position, and other internal and external factors. The video suggests that investors should conduct fundamental analysis to assess the true value of a company and avoid being misled by hype or fraudulent practices.

Highlights

Vinod and Deepak discuss the luxurious lifestyle of a man with 1000 designer shirts and 340 designer shoes, each costing over 20K.

The man, known as 'Andhras Bill Gates,' is admired for his frequent international travels and 12 luxury cars.

Deepak agrees with Vinod, acknowledging the man as a youth icon and inspiration for many.

At 9:15 AM, Deepak becomes tense upon seeing a significant drop in the share price of a company he invested in, from 158 to 120 in minutes.

The man they were admiring confesses to a 24-year scam, causing a market panic and a drastic drop in share value to ₹6.50.

The man, Mr. Raju Ramalinga Raju, is revealed as the mastermind behind the Satyam Scandal, once celebrated for corporate governance.

Raju's background includes an MBA from Howon University and initial ventures in the restaurant and cotton businesses.

Inspired by Dhiru Bhai Ambani, Raju enters the IT sector, founding Satyam Computers in 1987 with 10 engineers.

Raju's company, Satyam, experiences a breakthrough during the Y2K crisis, providing solutions that prevent global computer system crashes.

Satyam's success is marred by doubts as the company's rapid growth seems unsustainable.

Raju's fraudulent activities involve creating over 340 shell companies to circulate money and inflate profits.

The Satyam Scandal is triggered by the 2008 Lehman Brothers Crisis, causing a global depression in real estate.

Raju's manipulation of Satyam's MIS system allowed him to control and falsify financial reports.

The scandal unfolds as Raju's plan to merge Satyam with Maytas Infrastructure backfires, leading to his confession.

Post-scandal, a bidding war between L&T and TechM ensues for control of Satyam, with TechM eventually taking over.

The Satyam Scandal results in significant losses for shareholders and a loss of faith in the company's glamorous image.

The video concludes with a call to action for viewers to learn from the scandal, practice fundamental analysis, and stay cautious in investments.

Transcripts

Time is 8:30 AM and Vinod is talking with his best friend Deepak Kalal.

What a lifestyle this person has, almost 1000 designer shirts he has.

Awesome life he has, 340 varieties designer shoes he has, each shoe is more than 20K.

Not only this, sometimes he is visiting Amsterdam or Argentina,

sometimes Arab countries or New York, life should be like this.

He has12 luxury cars, Merc, BMW, boss, life should be like this.

Deepak responds on this that dear friend you are telling correct, he is known as

Andhras Bill gates and is a youth icon for everyone.

All the colleges are calling him, 15-20 years kids, all are excited that life is like this.

At 9:15 when Deepak switch on his TV, he gets tense and

was saying that what's happening, Vinod responds that what happened.

Watch in TV, I have a share of this company, It was at 158 and within 5 minutes,

now it is at Rs 123, Rs120, whats happening bro.

When he switched on the TV, he felt the ground slipping under his feet.

About whom they were talking that guy has openly written a letter to the directors and

confessed that for the last 24 years he was doing nothing but SCAM.

Noone could ever identify and due to which there is a panic in the market.

The next day this share will be sold at Rs 6.50 instead of 158.

"Entire money waste "

Friends I am talking about the biggest corporate scandal in our country

which is again setting an example, that is why people should not fall for the clamp.

Why People can be easily manipulated by showing glamorous stuff.

Mr. Raju Ramalinga Raju Yes, the man who was behind the entire crime.

He confessed in the letter that whatever for the last 20-24 Years It been a complete fraud.

It is interesting that he was called Bill Gates of our country.

He received the Best Award for Corporate Governance Just 4 months ago

an international company or an international agency had given that

brother if corporate governance is there, it should be like this, this was our inspiration.

All the Youths were crazy that we have to become this and now

everyone's senses were blown away. Please watch this video till the end, today

we will understand Satyam Scandal.

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After doing his MBA from Howon University, Mr. Raju has come to India.

He is from a farmer's family, his father saw that he has a little interest in

the restaurant business, so with little help he opened his restaurant business,

after that, it did not run properly. Within a few months, he got inspired by the late

Dhiru Bhai Ambani. All those people who were in the 80s and 90s, Its no surprise that

everyone was inspired by the late Dhiru Bhai Ambani, by seeing him,

he started a cotton business. For those who don't know, Reliance was

earlier in the cotton business. so textiles, that also did not run much and after that

he joined the construction business, that also did not run.

If you see technically then he was covering the three basic necessities of our country.

What is it, It is Roti, cloth, and houses everyone says that if you do business on it

then for sure, you will make money. That is precisely what he did, roti cloth and house

butt in the middle of 85-86 while discussing with his friend, they saw one thing,

they saw one thing that the next big thing is going to be IT (Information Technology).

Globally, a lot of things were happening and that is what he did.

In 1987, with the help of 10 engineers, they made Satyam Computers.

Do you know if there is meaninglessness in your heart, then you do its

preparation in advance, and this is precisely what he did.

Exactly after one year in 1888 he from Maytas Yes,

Infrastructure Maytas Construction, I will tell you an interesting thing, they had already

decided that the direct work will be done in reverse, in the name of Satyam,

the wrong deeds will be done in the name of the Maytas, look at the name of the Maytas,

what is this, now spell Satyam then turn it upside down, it becomes MAYTAS.

They had already decided that all the bad deeds will be done through MAYTAS.

It was purely for construction and real estate. At that time Hyderabad metro projects were

about to come and they were aware before only, and he knew this thing that

if he buys all the land then there will be only money in life and

this is exactly what he thought. He thought let me do this thing as soon as possible,

then they started acquiring all lands through the MAYTAS, but there was a problem,

before the problem, and Income breakthrough came.

You will be surprised to know that more than 150 to 180 Fortune 500 companies were the

clients, Those big people who do so many checking were clients.

the question arises here, Their breakthrough had come during 2K,

it was believed in the 2000s that all the computers of the world would be crashed

because of time zones. That time, wherever all the computer systems are there, their time

was like 01,02 date system was used, then it was 1999,

then when 2000 used to come it used to become 00. how would it become like

1999 has become 99 in 1998 it becomes 98 but if it goes to 2000 it becomes 00.

The fear was that engineers and software developers had not applied ahead of it.

Worldwide computers all systems will get crashed, someone's billing system is running.

because of this fear, many people did not even celebrate the New Year at that time

that they will get a bill of 50K instead of10K bill as computers will not work properly.

That's why many people were sitting at home and his team of engineers has done

a very good job to find a solution, that is why he got the first face,

The moment Y2 K's name and fame were started fading, they realized that

money will not come like this. So what to do, what to do, what to do.

The listing was done in 1991 in Indian exchange.

After the craze of 2000, 2001, Billion billion dollars were showing profits,

money is fun, it will be double from here and Triple from here,

Just like nowadays people say about few shares, that it cannot be wrong.

If you know any share of this kind then definitely write in the comment so

coming back to the points, few people were having doubts about him.

that many companies are unable to progress so quickly, how is it doing?

What it is doing and above all this MAYTAS was a little shady.

How, I tell you, Actually they have formed more than 340 small companies with CAs.

They used to circulate money through this and buy properties of MAYTAS also.

You need to understand that whenever the expenses of companies are shown,

they do not have to pay tax on it. To show this legit, they kept multiple employees as well.

You will be surprised that the salaries of directors of 340 companies were only 5K.

Now, you will say, which director will work in just 5K, the catch was that

people from farmhouses were directors, his watchman was director of a company,

so no one will ask more than the salary and that they get it.

Somehow, they have created many fakes accounts for money circulation.

listen carefully to where the money comes from.

They have understood that if the company is listed and somehow in the market if they

make perception that Satyam is doing exceptionally well then

the shareholder will buy the share, then the valuation of the share will increase,

If the share valuation will increase, then we will sell the shares. If we sell the shares

then with the same money, we will buy properties, and value of property will increase.

then we will sell the properties how much ever is above the margin is ours.

Whatever is made in the middle, it will be given to the company and gap will be filled.

If you have not understood, then watch it again, it has been explained in simple words.

You will understand.

He had a plan in his mind that in this way he can set the whole game.

The game was really good because historically it has been seen that

real estate prices go up and it never goes down.

Do you know, if you do something wrong, not today or tomorrow,

someday you have to suffer and this is what happened to them.

The problem came for them from Lehman Brothers Crisis, which happened

in 2008 in the United States.

Due to this, there was a depression in real estate and it was spread globally.

The lands they were buying at 30K per square foot, have dropped to half of the price.

They were scared as if MAYTAS will go down what we will show here

For Satyam, if they used to get 10 CR profit then they used to show a profit of 100 CR.

If profit used to be of 50 CR then 500 CR profit they used to show.

If profit used to be of 100 CR then 1000 CR profit they used to show.

Here they have done one more interesting thing, every established company has its MIS,

system, management information system, due to which every individual department,

their report is kept, for example, let's say someone is doing one IT project,

then how much fund is allocated for that and what is the performance of it.

The head of the project knows everything that this is the margin and

by this time it will be executed.

In Satyam, this entire MIS system was fudge it was made entirely by Mr. Raju accordingly.

It was interesting that even heads of different departments were not aware that

how much their department is in profit, loss, or how much revenue came.

only Mr. Raju used to know, that there are two things that Raju sir

can put an entry in the MIS system according to him. For example,

if he wanted to show that this project got additional 1K CR funding then he showed it.

Accounting fraud he was already doing, and also he was doing insider trading because

Whenever he was about to stabilize with someone, he knew that the market would go up,

he would have earned more than 1200 CR by doing insider trading in his own shares.

He used to do insider trading, the third thing was he used to inflate,

all his profits and tie-ups due to which share prices used to go high.

At that time, if someone carefully would have seen their balance sheet, cash flow statement, profit statement,

and a little common sense, then you would have understood that there are too many transactions

that are happening outside the company. Multiple crores of transactions were happening to unknown companies.

What happens is that when the environment is good, the market remains in the form and you are the inspiration

to everyone, then no one even doubts that it could be possible scam.

When the 2008 bubble burst, the prices have reduced and they understood that

this time it will be difficult to come out so they should think something,

But the fact is that a scammer does not give up so easily, then he did come back and a last try to come back.

He said that let me show Satyam overtaking MATYAS infrastructure and constructions,

Let me finish this instantly by getting it passed and due to this two things can happen,

Those real estate properties will come under and the gap because Satyam has been earning profit.

From here I will get that gap filled, plus in no profit, no loss, and I will get saved.

This thing has backfired them as to how did this happen as shareholders were started getting doubt on this,

that how they passed a resolution without approval, then there was a ruckus on it,

due to which, this thing did not get fully approved. Mr. Raju, when he got exhausted by thinking for 3 to 4 nights,

and thought what is this happening, our lives are now ruined, now I have to confess but did not give up.

Last one more attempt, DSP's Mr. Kothari sahib, yes, I don't understand all Scams, Harshad Mehta scam,

Ketan Scam, any scam you can check, he is somehow, in DHFL scam his name comes, I don't understand.

He went to Kothari and told him that raita is already spilled, this is the scene please let me know if you can help,

do one thing, you take over this anyways you takeover multiple useless companies, so takeover this as well.

Kothari told, son, you are trapped in the swamp in a very dirty way, I will not do this, after four days I am going to the baby

and I am going to complain about you, Now the scene was that friend is no more a friend,

Mr. Raju comes to know that this thing is going to come out before someone, he thought of confessing.

He wrote a letter and within two days, his share value came to ₹ 6.5 and This was how the Satyam Scandal took place.

Right after that, the bidding war has started between L&T and TechM was started, because of who will take the stake.

because Government did not want that the 4th largest company in the country to go down

so they started bidding on it because the wrong message gets conveyed. In the bidding L&T was left behind by TechM,

around Rs 58 share price came for TechM and its share prices raised up to 16 to 17%.

This is how Satyam employees got saved and it got merged into TechM.

There was a huge loss to the shareholders, those who were inspired by the glamorous life were in shock,

still few people were supporting them. Blind faith is common in our country but that's fine.

At the cost of shareholders and retail public money they were doing a scam, that was completely wrong.

This is what he did. Friends, this is how Satyam's entire ruckus arose.

Later it was learned that four days before he sent he sold all his shares, they knew that it will be a massive fall.

The auditor who belonged to them like PwC were also punished, they were penned for 2 years but

the funny thing is that Satyam used to pay double the money to their auditors as much as the rest of the IT company

used to give it to its auditors.

There were a lot of ruckuses, a little notoriety, a little change in the international front too.

From here we get to learn 2 to 3 things always remember in terms of companies that flame burnt red is actually not good

for the companies that are number one.

Second, you should know, a little bit of fundamental analysis, if you are investing and don't worry.

The course of investment and trading is coming max by 2nd week of July on our channel.

I will provide a discount of 20% on the first 200 to 300 people so stay tuned.

The third most important thing we got to learn from here is that if the market is trying to hype something does not mean

we lose our senses and we should use our logic if We should be cautious if something is running up too much

Friends, in the comment section, please write how is this video and on which topic you need the second video.

You have only two options either a Hedge fund as it's been pending for a long time or the current market senario.

Whichever option gets more votes, the next video will be on that topic, we have a target of 15K likes at least on this video

for the next scam part. If you liked something then please like the video and share it till then keep learning

keep growing, keep investing and keep trading.

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