The Tech Phoenix Satyam’s 100 Day Turnaround : Free Chapter Read

PROLOGUE

26 November 2008, Mumbai

The day was running its course like any usual Wednesday. But as the clock chimed 30 minutes past nine, Maximum City froze.Two gunmen entered Chhatrapati Shivaji Terminus, the heart of Mumbai’s city-transport constellation, and opened fire, killing hundreds of unsuspecting citizens. The historic railway station, an example of Victorian Gothic architecture, turned chaotic as passengers ran helter-skelter for cover. Moments later, an unbelieving world saw the Taj Mahal Palace hotel in Colaba begin to go up in smoke. Several explosions were heard across the hotel. Similar reports of mayhem flowed in from Cama Hospital, The Oberoi Trident and Leopold Cafe. Lashkar-e-Taiba, an international terror outfit, carried out a series of coordinated shoot-outs and bombings that shocked people. Mumbai lay under the siege of madmen, and India was furious.Prime Minister Manmohan Singh seethed with rage.1 For once, Opposition Leader L.K. Advani was on the same page. The elite National Security Guard flew down from the national capital to fight the terrorists. After three days of intense conflict, by 29 November, the place had been sanitized, and the battle won. The incident was unprecedented and shook the country to the core. But it also showcased India’s potential to tackle a crisis head-on and move ahead, instead of succumbing, getting numbed and paralysed to shocks. All these elements would be present in the Satyam story, which began in the same year. It’s that story that this book narrates.

Chapter 1

THE SCAM IS REVEALED

7 January 2009, multiple citiesLike every other day, I woke up at 5 a.m., got into my tracksuit and reached Marina Beach. It is the world’s second-largest beach after the one in Rio De Janeiro—Praia do Cassino. That day, the weather was excellent and the breeze pleasing. The waves repeatedly touched the shores and retreated in a lazy rhythm. I saw men venture into the sea for fishing and ships anchored deep. A few morning walkers were busy feeding pigeons. At frequent intervals, flights descended towards the Chennai Airport for landing.If jogging on the sand was physically exhausting, running closer to the sea where the sand is wet (stiff and tight) was pure joy. As I ran the 5.5-kilometre stretch from Lighthouse to Anna Memorial and back, my mind found the clarity to think through solutions to a few complicated problems. Little did I know then that I would, for the next several weeks, camp in the Nizam city of Hyderabad on a government mission, missing this opportunity to jog on the Marina! But as I will tell you soon, it was worth missing.A few hours later, I was in my office. My usually clear desk was cluttered as I tried to gather inputs for a presentation. A ticker appeared on the chat box. ‘`5,000 crore fraud in Satyam. Raju steps down.’I hastily typed, ‘Oh my God! Any proof?’

My friend wrote, ‘Give me a few seconds.’In those few seconds, as time froze for me, I stared at the computer. I couldn’t believe that this man, who once sat next to the US president in a public function, cooked the books.1The proof came as an email attachment. It was a complete story of confession, now famous as the ‘riding-a-tiger’ letter, from the man who built Satyam into a shining star of the outsourcing business. I read with shock and disbelief. At around 9.45 a.m., India’s market regulator, the Securities and Exchange Board of India (SEBI), had a heart-stopping moment. Its head, Chandrashekhar Bhave, received this very same explosive mail from the chairman of Satyam Computer Services Limited, Byrraju Ramalinga Raju. In that letter, addressed to the Satyam board of directors, copied to SEBI and the stock exchanges, Raju made a stunning disclosure. The man revered as God in his native state of Andhra Pradesh2 said he had falsified the company’s books of accounts for several years. A stunned National Stock Exchange (NSE) called up Company Secretary G. Jayaraman to check if the content was correct. At 10.53 a.m., the confirmation of the mail’s genuineness was faxed with the company’s stamp affixed. There were repercussions across the world as incredulity slowly gave way to acceptance of reality. An hour later, a series of phone calls were made across the world. In a motel in Frankfurt, Germany, a Satyam employee woke up following the telephone’s persistent ring. It was 7.30 a.m., Central European Time. The room’s curtains had been drawn, and it was snowing outside.‘Good morning, Sir. This is from the hotel’s front desk.

Kindly make alternative payment arrangements, or you will have to check out by noon.’‘What?’‘Kindly make alternative payment arrangements, or you will have to check out by noon.’‘But why?’‘Your credit card has been deactivated.’‘How come?’ He just didn’t understand what she was saying.‘Sir, switch on CNN-IBN. You will have all the details.’The man dragged himself to pick the remote and half stupefied punched the numbers.On the screen appeared the story of Ramalinga Raju’s daring heist. Till now, in history, frauds had either been detected or whistle-blown. For perhaps the first time, a perpetrator was singing voluntarily. Till now, the world over, an investigation had led to a confession. For the first time, an admission would lead to an inquiry.Several such calls were made in different parts of Europe and Australia. Some hotel guests frantically reached out to customers for help for making payments to the hotel or for making alternative accommodations, and a few walked the distance to their workplace to seek shelter. India’s credibility was on the line. Had the information technology (IT) sector, the darling of the masses, turned rogue? The revelation jolted corporate India, the Indian middle class and the rest of the world. By evening, it was clear the emerging scandal would hit every stakeholder—investors, employees, customers, bankers and regulators—big time.The repercussions were swift.In Dalal Street, the nerve centre of India’s equity market, the Satyam stock fell like ninepins. Investors, who once paid fancy prices to acquire the shares in secondary market operations and initial public offerings, both in India and abroad, now felt betrayed. By the end of the day, the scrip dropped by almost 80 per cent, cleaning up billions of rupees worth of investors’ wealth.

A year ago, in January 2008, Satyam quoted `541. On 6 January 2009, you could have bought a Satyam share on the NSE at `178.20.3 On 9 January 2009, the share traded at`11.50 on the Bombay Stock Exchange (BSE) and `6.50 on the NSE.4 What a fall! A professor of corporate finance and capital market, teaching a class that day, told his students not to touch Satyam even with a bargepole. Worse followed.Employees were shattered psychologically and financially. The prospects of getting a salary for the first month of the new year seemed bleak, and the possibility of becoming unemployed looked real. The fact that in 2008, there wasn’t much recruitment on campuses added to the dismal scenario.5A few top leaders of Satyam working in various geographies were angry. Their effort and sweat in building the company had gone down the tube. They worried about their personal image getting tarnished and wanted to leave the company.Customers were concerned about the continuity of projects executed by Satyam. There was every probability of the need to migrate to an expensive competitor as Satyam’s future looked dim. Many hesitated to pay the company its dues. Worse still, some customers turned anxious about a possible setback in their brand image if they continued associating with a ‘tainted’ organization and so wished to step out. There was a genuine fear that Satyam may become an international outcaste.The US Securities and Exchange Commission (SEC) geared itself to initiate action as Satyam was listed on the New York Stock Exchange (NYSE). So did the regulators in India, particularly the Ministry of Corporate Affairs (MCA) and SEBI. The Indian government seriously considered the fallout of India’s image in the international marketplace. Coming close on the heels of the global financial crisis of 2008, which the country had smartly sidestepped, it was terrible news.India was angry—very, very angry.And then, in the next 100 days, by 16 April 2009, the place had been sanitized, and the war won. On the same day, the nation went to the polls.This is the story of those dramatic 100 days, when the Indian government, in an unprecedented public–private partnership, masterminded the most remarkable turnaround in corporate history.And as a board member, I was a part of the transformation; it was an act that later got me the Padma Shri. In the board were Kiran Karnik, Deepak Parekh, Tarun Das, C. Achuthan and S. Balakrishna Mainak.

WEAVING WOOL

Satyam’s financial results took everyone for a ride: the analysts, the investors, the regulators and those who gave away awards.The results hoodwinked the regulators and investors as Satyam fudged numbers to announce profits that met or surpassed analysts’ expectations. And irrespective of the industry’s performance, the company consistently posted a net margin above 20 per cent quarter after quarter. Analysts praised Ramalinga Raju’s vision, and organizations feted him with awards. For example, in 2007, Ernst & Young named Raju the ‘Entrepreneur of the Year’. Meanwhile, The Institute of Internal Auditors, USA, gave the ‘Recognition of Commitment Award’ to Satyam’s internal audit team. Microsoft announced Satyam as ‘Citizenship Partner of the Year’, and Computer Associates gave the ‘Vision, Impact, Progress Award, 2007’ to Raju’s company. A year later, in 2008, Satyam won the ‘Golden Peacock Global Award’ for excellence in corporate governance. Once the scam broke out, the UK-based World Council for Corporate Governance took it back. The same year, it won the ‘SAP Pinnacle Award’ under the ‘Service—Ecosystem Expansion (Growth)’ category! Today, the irony stares us in the face. Clearly, the organizers had no clue about the hidden truth.

Learn more about Satyam’s phoenix recovery here: https://amzn.to/3FCJHEP