Hyderabad, Jan 07: Satyam Computer plunged into a deep crisis on Wednesday after its chairman B Ramalinga Raju resigned after admitting to major financial wrong-doings and saying his last-ditch efforts to fill the “fictitious assets with real ones” through Maytas acquisition failed.
“It was like riding a tiger, not knowing how to get off without being eaten,” Ramalinga Raju said in a letter to Satyam’s board of directors, wherein he listed major financial wrong-doings over the years to inflate the profits.

Raju in a letter to the company’s board accepted that the balance sheets were manipulated to show fictious balance of Rs 5040 crore. Notably, no board member had any knowledge of the real situation of the books. Raju added that the attempts to eliminate manipulations have failed.

Following is the text of the letter Raju wrote to the Satyam board:

1) “It is with deep regret and tremendous burden that I am carrying on my conscience, that I would like to bring the following facts to your notice:

The Balance Sheet carries as of September 30, 2008, a) Inflated (non-existent) cash and bank balances of Rs 5,040 crore (as against Rs 5,361 crore reflected in the books);

b) An accrued interest of Rs 376 crore, which is non-existent

c) An understated liability of Rs 1,230 crore on account of funds arranged by me;

d) An overstated debtors’ position of Rs 490 crore (as against Rs 2,651 reflected in the books);

2. For the September quarter(Q2) we reported a revenue of Rs 2,700 crore and an operating margin of Rs 649 crore(24 per cent of revenue) as against the actual revenues of Rs 2,112 crore and an actual operating margin of Rs 61 crore (3 per cent of revenues). This has resulted in artificial cash and bank balances going up by Rs 588 crore in Q2 alone.

Legal experts say Raju could face up to 10 years imprisonment for the fraud. Listed at New York Stock Exchange, the company could face regulatory action in the US, analysts said.

Meanwhile, Ram Mynampati will act as an interim CEO

“Under the circumstances I am tendering my resignation as the chairman of Satyam and shall continue in this position only till such time the current board is expanded. My continuance is just to ensure enhancement of the board over the next several days or as early as possible”, B Ramalinga Raju said.

Noting that every attempt to eliminate gaps in balance sheet, purely on account of inflated profits over several years, failed, Raju said: “I am now prepared to subject myself to the laws of the land and face consequences thereof.”

Low percentage of promoter equity in the company, where four independent directors resigned in the last two weeks over the acquisition fiasco, could lead to a takeover and expose the gap, he said in the letter, also sent to regulator SEBI. The promoters’ share in Satyam has now dipped to just over 3 per cent that too is pledged with lenders.

Meanwhile, Satyam shares nosedive nearly 54 percent at Rs 83 after resignation of chairman, managing director.

While Raju recommended DSP Merrill Lynch be entrusted the task of “quickly exploring some merger opportunities,” the company has now informed the stock exchanges that the investment banker has terminated its engagement with Satyam.

Satyam, considered a ripe proposition for acquisition, was pushed into crisis after Raju was forced to abandon the acquisition of Maytas Infrastructure and Maytas Properties promoted by his son.

In a regulatory filing the company said Raju would continue to be the chairman till the board is expanded.

The resignations, ahead of January 10 board meeting pushed the company into crisis and paved the way for immediate restructuring of the board and the management.