Back from the Edge
When Ramalinga Raju confessed his monumental fraud on January 7, 2009, he not only brought Satyam Computer Services, India’s fourth-largest information technology company, perilously close to implosion but also turned topsy-turvy the lives of his 50,000 or so employees. Till that day, being a Satyam employee in Hyderabad, the company’s headquarters, was a matter of pride. Satyam had put the city on the world map. In return, Hyderabad pampered the people of its favourite company — traffic cops let them off for minor violations, marriage proposals seldom got rejected, and banks fell over each other to give loans.
The confession changed everything, almost overnight. Landlords refused to give houses on rent to Satyam employees; they were blacklisted by banks for credit card and personal loan. As banks froze all credit lines, employees had no option but to settle airline and travel bills with their personal credit cards. When Tech Mahindra formally took over Satyam (it has since been renamed Mahindra Satyam) in mid-2009, it was not just a financial turnaround that needed to be done or an irregularity that had to be set right — the pride of a people had to be restored. On June 20, 2009, Mahindra Satyam CEO C P Gurnani had presented a three-year turnaround plan to the directors. “Midway into it, I am ahead of the milestones I had submitted,” says he.
After losses of Rs 8,174 crore in 2008-09 (because of provisioning of Rs 7,992 crore for Raju’s misdemeanors) and Rs 124 crore in 2009-10, Mahindra Satyam reported a profit of Rs 120 crore in the first six months of 2010-11. Income for the first six months of the current financial year stands at Rs 2,490 crore, which could give an annual income not too different from 2009-10’s Rs 5,481 crore, keeping in mind the appreciation in the rupee. Revenues in the last two quarters have been similar. This indicates the business has stabilised. Customer attrition has stopped; in fact, the company has added 44 new customers. And employees, the company’s top functionaries insist, are no longer an anxious lot. “Floor walks show that the anxiety over stability and security has given way to engagement and innovation,” says Chief Marketing Officer & Chief People Officer T Hari. Adds CFO S Durgashankar: “The stigma of the scam is gone. Banks are more than willing to give loans to our people.”
The first task, of course, was to close the book on the scam. The company was being investigated by Andhra Pradesh’s Crime Investigation Department as well as the Central Bureau of Investigation, Serious Frauds Investigation Office and Enforcement Directorate. Also sniffing around were the Securities & Exchange Board of India, Securities Exchange Commission of the US, the income tax department, registrar of companies and Software Technology Parks of India. All files were in the possession of these agencies. About 100 forensic experts drawn from KPMG and Deloitte would go to these agencies, largely CBI, copy the files during the day and pore over them at night.
All told, 30 terabytes of information was assessed. Kept in hard copies, the information was enough to fill 270,000 file cabinets of 5 ft by 5 ft. Over 2 million emails were reviewed, 300 hard disk drives imaged, and 1 billion lines of transaction data put under the lens. More than 200 bank accounts were analysed and 7,000 consumer contracts reviewed. At the end of the day, 7,500 inflated invoices were found (all such invoices were marked “S”, which helped the experts string them together), which had caused income and profit to be overstated by Rs 6,500 crore. This resulted in over 6,000 reconciliations in bank accounts and over 200,000 adjustments in the books because over 300 different income heads were impacted.
The second challenge was to hold on to customers. When the scam broke out, Satyam had about 650 customers; the tally now stands at around 350, including the 44 new ones. Thus, almost 350 customers have left the company. CTO A S Murty, who served as the interim CEO of the company before Tech Mahindra came on board, discloses that most of these desertions happened within three months of Raju’s confession. The government-appointed directors, to begin with, called up most large customers to say things would be all right soon. The company’s core strength, its delivery capabilities, was intact, they told nervous CTOs. Had it not been for them, the run on Mahindra Satyam could have been worse.
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