For Indian markets and the IT industry, the name Ramalinga Raju still means one thing: the day in January 2009 when a celebrated founder admitted that his company’s books were fiction. The scale was ₹7,136 crore, about US$1.5 billion.
Before Satyam
Byrraju Ramalinga Raju was born on 16 September 1954, the eldest of four siblings in a Telugu family. A West Godavari agriculturist’s son, he earned a Bachelor of Commerce degree at Andhra Loyola College in Vijayawada and an MBA at Ohio University. Back in India in 1977, he married at twenty-two.
His first ventures did not last. They included Dhanunjaya Hotels and a cotton spinning mill, Sri Satyam Spinning, funded by the Andhra Pradesh Industrial Development Corporation with ₹9 crore. When those failed, he moved into real estate and started a construction company, Maytas Infra Limited.
Building the company
In 1987 Raju set up Satyam Computer Services with his brother-in-law DVS Raju, an engineer, at P&T colony in Secunderabad, with 20 employees. Raju had no engineering background. In 1991 the firm landed its first Fortune 500 client, John Deere, and Raju worked through Indian bureaucracy to win clearance to transmit data out of the country. The company listed in 1992 and went on to list in New York in 2001.
In 1999 he launched Satyam Infoway, or Sify, as an internet subsidiary. He also joined Harvard Business School’s Owner/President Management programme in the 1990s, and in a 1998 interview with the Deccan Chronicle he spoke of operating in 50 countries with more than 50,000 staff.
His standing in Andhra Pradesh was helped by politics. After Chandra Babu Naidu became Chief Minister in September 1995 and made IT a priority, Raju became instrumental in shaping state initiatives such as “Mee Kosam”. He had unfettered, personal access to the chief minister, and research into his life has pointed to close links between business and politics.
Satyam’s revenues passed $1 billion in 2006 and $2 billion in 2008. At its peak it had operations in as many as 65 countries and, weeks before the fraud surfaced, reported annual revenue of $2.4 billion and 53,000 employees. Total assets on its balance sheet tripled between 2003 and 2007, reaching $2.2 billion. Raju’s Byrraju Foundation and Satyam Foundation, behind the 108 emergency medical service, added to his reputation.
The confession
Trouble began in December 2008, when Satyam announced a plan to buy two Maytas firms owned by Raju’s sons. Shareholder opposition forced him to call it off within hours, and the share price began to fall. That same month the World Bank blacklisted Satyam for eight years over data theft and bribing bank officials.
On 7 January 2009 Raju resigned from the board and admitted the accounts had been falsified over years. Cash and bank balances were overstated by ₹5,040 crore, about US$1 billion, that did not exist. PricewaterhouseCoopers’ Indian affiliate, the auditor, had certified $1.1 billion in cash when the real figure was $78 million. In his letter, he wrote that the gap between actual and reported profit “attained unmanageable proportions,” and compared it to riding a tiger.
Courts and consequences
Raju and his brother B Rama Raju were arrested by Andhra Pradesh CID police. Bail came and went: the Supreme Court cancelled it in 2010 and he surrendered in November, and it granted default bail in November 2011 after the CBI missed a chargesheet deadline. The Enforcement Directorate filed its own chargesheet against him and 212 others in October 2013. Andhra Pradesh also attached 44 properties belonging to promoter family members.
On 9 April 2015 a special CBI court sentenced Raju, his brothers and others to seven years in prison, and fined him ₹5.5 crore. A special court in Hyderabad granted bail on 11 May. In January 2018 the market regulator barred Price Waterhouse from auditing listed Indian companies for two years.
Tech Mahindra bought Satyam in April 2009 in a government-sponsored auction, and the Satyam name vanished in 2013 when Mahindra Satyam merged into Tech Mahindra. More recently, Brane Enterprises, a firm with family links to Raju in which he acts as a mentor, has faced scrutiny over sudden layoffs and unpaid wages for more than 2,500 employees.
