The chairman of Satyam Computer Limited, one of India's largest IT companies, has resigned after having revealed that he had systematically altered his company accounts for a number of years to show that Satyam had $1 billion worth of fictitious assets.
The company incurred a $253 million liability on funds arranged by Ramalingam Raju and revenues for the second quarter, ending September 2008, were down 20 percent while Satyam's operating profits were down a staggering 97 percent.
The scandal which came into light earlier today, has already been qualified as India's Enron, in reference to the US Energy Company which vastly overstated its assets back in 2001 and whose demise caused the fall of accounting firm, Arthur Andersen.
The 22 year old company has grown from its construction roots to a software and services giant with nearly 53,000 employees in 66 countries and revenues of more than $2.1 billion; ranking only behind the likes of Wipro, TCS and Infosys.
Satyam's fall was a brutal one as the company lost more than three quarters of its value in the past few hours and several of its high profile customers have already said that they will be terminating their contracts with the company.
Satyam's auditor, PriceWaterhouseCoopers is likely to be under intense scrutiny after failing to identify significant discrepancies in the company's balance sheet.
Likewise, investors and financial watchdogs are going to pay close attention to the other Indian outsourcing companies and some UK companies could even reassess their outsourcing needs as the falling pound sterling makes insourcing more attractive.
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Satyam's fall is going to have a devastating effect on investors' confidence with the backdrop of the global economic turmoil. Some have even said that this could affect investments in India as the level of trust reaches new lows. Ironically, Satyam means "truth" in India's ancient Sanskrit language.
Satyam Computer head quits, admits doctoring books