Did Sir Walter Scott
have a premonitory
dream about Ramalinga
Raju? From criminal
investigators and serious
fraud investigators to forensic
accountants, the accounts of
Satyam Computers remain a
puzzle. Most people in India
and other countries agree that
this is the moment for investors,
regulators and lawmakers to take
decisive action.
How could this have happened?
Satyam's sales grew consistently
over the past ten years, as did
its reserves. Why did no one -
namely the auditors - question
such consistency in the face of
the Indian Rupee appreciation
against the US Dollar in 2007
and 2008?
Another issue was the growth of
cash balances that were extremely
high. Yet again, this did not draw
much attention. A quick look at the
key fi nancial ratios given in Table
1 shows that this was a company
with very high returns and profi t
margins with very strong cash
levels and unusually high effi ciency
of asset utilisation.
Then, what really went wrong?
In his confession on January 7,
2009, Raju said that the audited
fi nancial results as declared on
September 30, 2008, contained
"infl ated (non-existent)" cash
and bank balance of Rs 5,040
crore (as against Rs 5361
crore refl ected in the books),
an accrued interest of Rs 376
crore which is non-existent,
an understated liability of
Rs 1,230 crore on account of
funds arranged by him and an
overstated debtor position of
Rs 490 crore (as against Rs 2651
refl ected in the books).