Full text of Raju's resignation letter to the Board

To

     The Board of Directors,

  Satyam Computers Services Ltd. 

    From

    B. Ramalinga Raju,

    Chairman,

    Satyam Computer Services 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. 

I would like the board to know: 

1. That neither myself, not the Managing Director (including our spouses) sold any shares in the last eight years-excepting for a small proportion declared and sold for philanthropic purposes. 

2. That in the last two years a net amount of Rs 1,230 crore was arranged to Satyam (not reflected in the books of Satyam) to keep the operations going by resorting to pledging all the promoter shares and raising funds from know sources by giving all kinds of assurances (Statement enclosed, only to the members of the board). Significant dividend payments, acquisitions, capital expenditure to provide for growth did not help matters. Every attempt was made to keep the wheel moving and to ensure prompt payment of salaries to the associates. The last straw was the selling of most of the pledged share by the lenders on account of margin trigger. 

3. That neither me, nor the Managing Director took even one rupee/dollar from the company and have not benefitted in financial terms on account of the inflated results. 

4. None of the board members, past or present, had any knowledge of the situation in which the company is placed. Even business leaders and senior executives in the company, such as Ram Mynampati, Subu D T R Anand, Kesab Panda, Virender Agarwal, A S Murthy, Hari T, S V Krishnan, Vijay Prasad, Manish Mehta, Murali V, Sriram Papani, Kiran Kavale, Joe Lagioia. Ravindra Penu Metsa, Jayaraman and Prabhakar Gupta are unaware of the real situation as against the books of accounts. None of my or managing directors immediate or extended family members has any ideas about these issues. 

Having put the facts before you, I leave it to the wisdom of the board to take the matters forward. However, I am also taking the liberty to recommend the following steps: 

1) A task force has been formed in the last few days to address the situation arising out of the failed Maytas acquisition attempt. This consists of some of the most accomplished leaders of Satyam: Subu D, T R Anand, Keshab Panda and Virender Aggarwal, representing business functions, and A.S.Murthy, Hari T and Murali V representing support functions. I suggest that Ram Mynampati be made the Chairman of this task force to immediately address some of the operational matters on hand. Ram can also act as an interim CEO reporting to the board. 

2) Merrill Lynch can be entrusted with the task of quickly exploring some merger opportunities. 

3) You may have a ‘restatement of accounts’ prepared by auditors in light of the facts that I have placed before you. 

I have promoted and have been associated with Satyam for well over twenty years now. I have seen it grow from few people to 53,000 people, with 185 Fortune 500 companies as customers and operations in 66 countries. Satyam has an excellent leadership and competency base at all levels. I sincerely apologize to all Satyamites and stakeholders who have made Satyam a special organization, for the current situation. I am confident they will stand by the company in this hour of crisis. 

In light of the above, I fervently appeal to the board to hold together to take some important steps. Mt T R Prasad is well placed to mobilize support from the government at this crucial time. With the hope that members of the Task Force and the financial advisor, Merrill Lynch (now Bank of America) will stand by the company at this crucial hour, I am marking copies of this statement to them as well. 

Under the circumstances, I am tendering my resignation as the chairman of Satyam and shall continue in this position only till such time the current board is expanded. My contribution is just to ensure enhancement of the board over the next several days or as early as possible. 

I am now prepared to subject myself to the laws of the land and fact the consequences thereof. 

(B. Ramalinga Raju) 

Copied marked to: 
1) SEBI Chairman 
2) Stock Exchanges

 

Raju brothers to be produced before court within 24 hours: Police

HYDERABAD: The tainted founder of Satyam B Ramalingam Raju and his brother Rama Raju will be produced before the court within 24 hours, a top police official said.  "Both are in our custody... a case has been registered and we will produce them before the court within 24 hours," Director CB-CID V S Kaumudi told reporters outside the Director General of Police's office.  Kaumudi said they would seek police custody of the brothers when they are produced before the court tomorrow. He said they were arrested on the bases of a complaint filed by an investor. Kaumudi said they came to the DGP'S office and they have been arrested in connection with the business of the Satyam Computers.  "They are now in CID custody and they will be produced before the court sometime tomorrow," he said.  Mr Ramalinga Raju, Satyam's disgraced chairman, along with former MD Mr Rama Raju, was arrested late Friday night, two days after he confessed to perpetrating a Rs 7,000-crore financial fraud.  The CID had registered a case against Mr Raju based on his confessional letter to the Satyam board and SEBI. The Raju brothers have been booked for criminal breach of trust, cheating, criminal conspiracy and forgery under the Indian Penal Code.  Late night meetings were still on at the government level to finalise a new board for Satyam. Names doing the rounds include former Nasscom president Kiran Karnik, former SEBI chairman M Damodaran, former MphasiS chief Jerry Rao and angel investor Saurabh Srivastava.  With the government's decision on Friday, the board meeting of Satyam scheduled for Saturday will not take place. As per law, the new board will hold its first meeting within seven days, the minister added. The government's decision came as it was concerned about the future of the company and its stake holders including employees

Others may curse Ramalinga Raju; his village blesses him

ELURU/AP: For the whole world B Ramalinga Raju may be a villain, after the startling revelation of fraud in the company he founded, but for  residents of his native village in West Godavari district, he is still a good samaritan.  The non-descript village, Garagaparru, shot into the limelight with Satyam Computer growing to become the fourth largest IT firm in the country.  The villagers hail the development works undertaken by the Byrraju Foundation, the charitable arm of Satyam, and consider Raju as a good man.  "He has done many development works in this region. We hope he will tide over the present crisis," Rama Raju, a villager said.  Several other villagers have expressed similar feelings. The Satyam issue is the hot topic in the village ever since Raju tendered his resignation as chairman of the company.  The Byrraju Foundation has taken up a number of development work in the fields of education, health, drinking water and several others in hundreds of villages in the coastal districts of West Godavari, East Godavari, Krishna, Visakhapatnam and others. However, the developments in the company came as a shock to hundreds of shareholders in the West Godavari district.  "I have lost Rs 64,000. Many others in the town too lost large amounts," a shareholder in Eluru, who refused to be named, said.

We are All support for Raju

He may have a few friends left among his board of directors. And the market grapevine is that many of his once-trusted lieutenants may jump the ship at the first sight of a new pasture. But this does not make Ramalinga Raju, the founder chairman of Satyam Computer Services Ltd (SATYAM.BO : 23.85 -16.1), which has been in the news for all the wrong reasons in recent days, without company. Now, Raju aficionados have gone that extra mile to launch a dedicated website, www.ramalingaraju.com, for their besieged hero. No doubt when the company is under legal scrutiny, this is more of a support-gaining exercise or tricks by the crisis management team. Though the company spokesperson maintained the portal was not developed by any present or former employee of Satyam, it is learnt that it was designed and uplinked by a very close relative of Ramalinga Raju. It starts with Dear Ramalinga Raju Garu, we are all with you @ any point of time....

and our respects and confidence remain the same even today... You are still a hero among all of us and would always remain one no matter what anyone says. It has a welcome site which talks about the initiative to launch this portal. It took 21 long years for someone to build an empire and reputation and today we stand a great chance of losing momentum... can the media houses and critics build an empire by giving direct employment to over 50,000 people? The messages would give some insights into the mindset of the Raju fundamentalists . They make for a heady cocktail of hero worship, regionalism, sycophancy and what not. For some, he is Satyam itself, for some others he is an icon, a king, a hero, a social worker par excellence, godfather and god itself. Sample this: Sir, you have out grown the reach of the so called big wigs of today s world with your noble deeds like Bryraju Foundation and 108 Helpline. Your achievements spill in volumes for me even to recollect. I can only say, Sir you came, you saw and you conquered not only the software business but our hearts of the common man, you are now Ramilinga Raju the people s man. We are all behind you in this need of the hour (sic) to see you as the winner and please do remember your victory is our victory. We salute you, sir . There are other postings blasting Raju detractors, including scribes and those cowards of a directors who had chosen to abandon the visionary in his hour of crisis. This is not to say some messages do dub the deal as maytas tsunami , but still hold Raju in high esteem. Yes Ramalingaraju is the one person who can bring back the glory of the company again. As a human being it s quite possible to take some wrong decisions. One way the decision took by Raju can be called as ridiculous but at the same time he alone can t be blamed for this issue. All the members who approved this will be responsible for this maytas tsunami. Some others advise the media and analysts to stop speculations about Raju s fate. Here is one that takes the cake: Stop speculations Satyam is Raju and Raju is what Satyam. there is no question about that ...one cant imagine Satyam without Raju....such a nice person . Here is another pearl of wisdom from a staunch Raju fan (all written in bold, italics and caps): Heated gold becomes ornament, beaten copper becomes wires. Deflected stone becomes statue. So the more pain get in life you become more valuable.... Thats what Satyam and Ramalingaraju. We are with you, we trust you, we are proud of you ... The member club has Megasoft CEO GV Kumar too, who writes that Ramalinga Raju is a visionary and a great doyen of Indian business and IT industry in particular. It s rather unfortunate that an entrepreneur and business-builder like him is being castigated for this just one single, aborted step, (right or wrong) after all these years of stellar leadership and contribution to the industry and the society. He remains a great man and respected figure to look up to for me and will continue to be so in the future. I request all to pause a bit and put an end to this unnecessary vilification and allow him to do what he did best and will do best i.e. build the company further. Lot of them are not realising the ripple effect which can be caused by letting this team down, people like these who can build companies like Satyam, EMRI 108, Byrraju Foundation are extremely rare, thousands of families are surviving on companies created by him directly or indirectly today, it s an economy by itself where even the country is being benefited through tax earnings and employment creation, and the social service which was an initiative by the same could also be effected. One gentleman says in his message: Who is more valuable to the public or nation? Is it one who serves 100% and has only 8% stake and distributing the rest of 92% to the public or nation? Or one who holds a substantial stake and distribute a mere loot to the public or nation? The messages in defence and praise on the website run into several hundreds. Whatever his fate be, going by the high drama now unfolding on the worldwide web, Raju may give stiff competition to the likes of SRK and MS Dhoni in commanding brand loyalty. As a cynic was heard saying, Satyam as a brand has taken a strong beating, but the brand Raju has been rising on the popularity chart .

Satyam's Raju brothers arrested by AP Police

HYDERABAD: The Satyam Computer Services drama reached its climax on Friday evening with its promoters B Ramalinga Raju and B Rama Raju arrested by the Andhra Pradesh police and the Central government taking control at the tainted firm.  "We have arrested both Ramalinga Raju and Rama Raju based on a complaint registered by the Criminal Investigation Department. We have initiated legal action and anyone who is guilty will be punished," said Andhra Pradesh DGP SS Yadav.  Mr Ramalinga Raju, Satyam's disgraced chairman, along with former MD Mr Rama Raju, was arrested late Friday night, two days after he confessed to perpetrating a Rs 7,000-crore financial fraud. The CID had registered a case against Mr Raju based on his confessional letter to the Satyam board and SEBI. The Raju brothers have been booked for criminal breach of trust, cheating, criminal conspiracy and forgery under the Indian Penal Code.  Friday evening saw the corporate affairs ministry stepping in to salvage Satyam by replacing its existing board of directors with 10 government-appointed directors. The move is aimed at preventing the existing board from tampering with evidence and to ensure the company continues its operations uninterrupted by an ongoing probe into the scam.  Corporate affairs minister Prem Chand Gupta told reporters late evening that the Company Law Board (CLB) has given an interim order to restrain Satyam's directors from acting in their board positions. "On the government's petition, the CLB has also allowed the Central government to appoint 10 nominees to function as directors of the company," Mr Gupta told journalists. ET had first reported the government's plan to nominate directors on Satyam's board on January 8.  Late night meetings were still on at the government level to finalise a new board for Satyam. Names doing the rounds include former Nasscom president Kiran Karnik, former SEBI chairman M Damodaran, former MphasiS chief Jerry Rao and angel investor Saurabh Srivastava.