Satyam chief quits over financial irregularities
"Like riding a tiger, not knowing how to get off without being eaten"
The founder of India's fourth largest outsourcing company has quit after admitting the company's revenue had been inflated.
B Ramalinga Raju, chairman of Satyam, admitted "non existent" cash and interest was logged on the company's balance sheet in September 2008.
In a letter to Satyam's board of directors, Raju said he was stepping down and was "prepared to submit himself to the law of the land".
Raju said that in September, Satyam reported second quarter revenues of 27bn rupees (£374m) against actual revenues of 21bn rupees (£292m), and an operating margin of 24 per cent against an actual margin of three per cent.
The revelation wiped more than 80 per cent off the value of Satyam's shares on the Bombay Stock Exchange today.
Satyam employs 53,000 staff in 66 countries, and counts 185 Fortune 500 companies among its customers.
In the letter, Raju said: "The gap in the balance sheet has arisen purely on account of inflated profits over a period of the last several years (limited only to Satyam standalone, books of subsidiaries reflecting true performance).
"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.
"It has attained unmanageable proportions as the size of company operations grew significantly."
He described the experience of trying to close the gap between the fictionalised revenue and actual turnover as "like riding a tiger, not knowing how to get off without being eaten".
The revelation follows Satyam's failed attempt last month to buy two construction firms partly owned by the company's founders.
The letter has also been circulated to the Chairman of Securities and Exchange Board of India and the stock exchanges, and Satyam has expressed dismay at the contents of the letter.
Interim CEO Ram Mynampati said the senior leaders of the company had gathered in Hyderabad and said in a statement: "We are obviously shocked by the contents of the letter.
"We have gathered together at Hyderabad to strategise the way forward in light of this startling revelation."
Satyam said it is "committed to uphold the highest levels of corporate transparency" and "will co-operate with the relevant regulatory authorities to conduct detailed investigations into this matter".
Market analyst TechMarketView warned the scandal could damage the reputation of other Indian outsourcers.
Managing partner Anthony Miller said in research note: "There is also a small risk that other leading Indian [outsourcers] will be irrationally tarred with the same brush, though judging by Indian stock market reaction, this has fortunately not been the case, at least with investors."