The chairman of Satyam Computer Services, which ranks as India’s fourth-largest software operation, has fessed up to years of book-cooking. Shares in the company crashed 80 per cent on Wednesday, taking the wider Indian stock market down 7 per cent.From his confession to the board of directors of Satyam:
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...
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 company operations grew significantly (annualised 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 that poor performance would result in take-over, thereby exposing the gap. It was like riding a tiger, not knowing how to get off without being eaten.
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 continuance 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 face consequences thereof.