A court in India has condemned Ramalinga Raju, the founder of Satyam Computers, to seven years in jail, in one of the country’s biggest ever corporate scandals involving an IT outsourcing firm. The sentence ends almost six years of investigation by India’s federal investigative agency, the CBI.
Known as the Enron scandal of India, the Satyam affair almost threatened to spoil the prospects of the nation’s entire outsourcing industry. It came to light in January 2009, when Raju confessed that he had overstated the company’s profits for years and falsified assets.
Days after his confession, the company’s share price nosedived, with investors from around the world losing well over US$2 billion.
Soon Mahindra & Mahindra, one of India’s largest conglomerates, bought Satyam for almost a throwaway price, and renamed the company Mahindra Satyam. The name Satyam, which means “truth” in Sanskrit, was so tainted that Mahindra later further rebranded the company as Tech Mahindra.
Today Raju is behind the bars, but Tech Mahindra has grown into a large IT services firm, with the company aggressively competing with the likes of TCS and Infosys in the global marketplace.
Along with Raju, eight other former executives of the company have also been found guilty, with each receiving a seven-year prison term. The court has also slapped a fine of $800,000 on Raju, while the other defendants were each fined five million rupees ($80,000).
The son of a farmer in India’s southern state of Andhra Pradesh, Raju established Satyam Computers in 1987. Within a few years, Satyam had became the country’s fourth largest IT services provider, with its stock being listed on both the New York and Indian stock markets.
Satyam Infoway, a subsidiary of Satyam Computers, became the first Indian information and communication technology company to be listed on the Nasdaq. When it collapsed, Satyam had a footprint to 30 countries and a large clientele in North America and Europe.
Raju has appealed against the verdict in a higher court.