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Satyam Computer Services (SAY)/Bears/Satyan's chariman agrees to India's biggest corporate governance scandal

Satyam's Chairman agreed to inflating the balance sheets of the company with artificial (non-existent) profits.

Of Satyam’s reported cash and bank balances of Rs 5,361 crore on September 30, Rs 5,004 crore was non-existent, Raju said in the letter. Operating margin in the quarter ended September 30 was 3% of revenue, instead of the reported 24%, Raju said. The company’s revenue was Rs 2,100 crore, 22% less than the inflated figure of Rs 2,700 crore that had been reported.

Raju arranged Rs 1,230 crore “to keep operations going” at Satyam over the last two years by pledging the founders’ shares and raising funds from other sources, he said.

“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,” Raju said. “It was like riding a tiger, not knowing how to get off without being eaten.”

His concern was that a poor performance, combined with the fact they held a small stake in the company, would make Satyam an easy target for a takeover, exposing the inflated figures, he said.

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