Satyam chairman Ramalinga Raju's letter

The chairman of Satyam Computer Services resigned on Wednesday, saying profits had been inflated over the last several years.

Following is the text of his letter, which was released by the Bombay Stock Exchange.

Note: references using Indian numerical system of crores and lakhs have been converted to Western system.

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To the Board of Directors

Satyam Computer Services Ltd.

From B. Ramalinga Raju

Chairman, Satyam Computer Services Ltd. January 7, 2009

Dear Board Members,

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:

1. The Balance Sheet carries as of September 30, 2008

a. Inflated (non-existent) cash and bank balances of 50.40 billion rupees ($1.04 billion) (as against 53.61 billion reflected in the books).

b. An accrued interest of 3.76 billion rupees which is non-existent.

c. An understated liability of 12.30 billion rupees on account of funds arranged by me.

d. An overstated debtors position of 4.90 billion rupees (as against 26.51 billion reflected in the books)

2. For the September quarter (Q2) we reported a revenue of 27.00 billion rupees and an operating margin of 6.49 billion rupees (24 pct of revenues) as against the actual revenues of 21.12 billion rupees and an actual operating margin of 610 million rupees (3 percent of revenues). This has resulted in artificial cash and bank balances going up by 5.88 billion rupees in Q2 alone.

The gap in the Balance Sheet has arisen purely on account of inflated profits over a period of 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 (annualized revenue run rate of 112.76 billion rupees in the September quarter, 2008, and official reserves of 83.92 billion rupees). The differential in the real profits and the one reflected in the books was further accentuated by the fact that the company had to carry additional resources and assets to justify higher level of operations -- thereby significantly increasing the costs.

Every attempt made to eliminate the gap failed. As the promoters held a small percentage of equity, the concern was that poor performance would result in a take-over, thereby exposing the gap. It was like riding a tiger, not knowing how to get off without being eaten.

The aborted Maytas acquisition deal was the last attempt to fill the fictitious assets with real ones. Maytas' investors were convinced that this is a good divestment opportunity and a strategic fit. Once Satyam's problem was solved, it was hoped that Maytas' payments can be delayed. But that was not to be. What followed in the last several days is common knowledge. I would like the Board to know:

1. That neither myself, nor the Managing Director (including our spouses) sold any shares in the last eight years -- excepting for a small proportion declared and sold for philanthropic purposes.

2. That in the last two years a net amount of 12.30 billion rupees was arranged to Satyam (not reflected in the books of Satyam) to keep the operations going by resorting to pledging all the promoter shares and raising funds from known sources by giving all kinds of assurances (Statement enclosed, only to the members of the board). Significant dividend payments, acquisitions, capital expenditure to provide for growth did not help matters. Every attempt was made to keep the wheel moving and to ensure prompt payment of salaries to the associates. The last straw was the selling of most of the pledged share by the lenders on account of margin triggers.

3. That neither me, nor the Managing Director took even one rupee/dollar from the company and have not benefitted in financial terms on account of the inflated results.

4. None of the board members, past or present, had any knowledge of the situation in which the company is placed. Even business leaders and senior executives in the company, such as, Ram Mynampati, Subu D, T.R. Anand, Keshab Panda, Virender Agarwal, A.S. Murthy, Hari T, S.V. Krishnan, Vijay Prasad, Manish Mehta, Murali V, Sriram Papani, Kiran Kavale, Joe Lagiola, Ravindra Penumetsa; Jayaraman and Prabhakar Gupta are unaware of the real situation as against the books of accounts. None of my or Managing Director's immediate or extended family members has any idea about these issues.

Having put these facts before you, I leave it to the wisdom of the board to take the matters forward. However, I am also taking the liberty to recommend the following steps:

1. A Task Force has been formed in the last few days to address the situation arising out of the failed Maytas acquisition attempt. This consists of some of the most accomplished leaders of Satyam:, Subu D, T.R. Anand, Keshab Panda and Virender Agarwal, representing business functions, and A.S. Murthy, Hari T and Murali V representing support functions. I suggest that Ram Mynampati be made the Chairman of this Task Force to immediately address some of the operational matters on hand. Ram can also act as an interim CEO reporting to the board.

2. Merrill Lynch can be entrusted with the task of quickly exploring some Merger opportunities.

3. You may have a restatement of accounts' prepared by the auditors in light of the facts that I have placed before you.

I have promoted and have been associated with Satyam for well over twenty years now. I have seen it grow from few people to 53,000 people, with 185 Fortune 500 companies as customers and operations in 66 countries. Satyam has established an excellent leadership and competency base at all levels. I sincerely apologize to all Satyamites and stakeholders, who have made Satyam a special organization, for the current situation. I am confident they will stand by the company in this hour of crisis.

In light of the above, I fervently appeal to the board to hold together to take some important steps. Mr. T.R. Prasad is well placed to mobilize support from the government at this crucial time. With the hope that members of the Task Force and the financial advisor, Merrill Lynch (now Bank of America) will stand by the company at this crucial hour, I am marking copies of this statement to them as well.

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.

l am now prepared to subject myself to the laws of the land and face consequences thereof.

(B. Ramalinga Raju)

Copies marked to:

1. Chairman SEBI

2. Stock Exchanges

CAP Foundation Launches Workforce Development Initiative

Linking Learning with Livelihood May-2007

A Workforce Development Initiative (WDI) making  Non-Governmental Organisations, corporates and like minded individuals come together and form enriching partnerships, have been launched on 18 April 2007 in New Delhi, India, to work towards linking learning and livelihoods for disadvantaged youth. The launch, made by CAP Foundation was to announce the formation of an alliance, the first of its kind, that will actively work towards  developing the workforce of  21st century India. The CAP Foundation is an independent registered organisation demonstrating public partnership initiatives between civil societies, corporate and government agencies in linking learning and livelihoods for communities of children, youth and women `at risk'. The Foundation  reaches out to the adolescent at risk by providing a holistic education and livelihood promotion module, which combines formal education with vocational training skill development training, life skill modules, job placement and career exploration opportunities, through an experiential mode, aimed at developing confident individuals capable of self directed growth. The Key outcomes of this launch were the signing of the CAP UK partnership document and showcasing the various partnerships of the alliance. A number of panels discussed issues related to the context of livelihoods in growing urbanisation, pre-employment training programmes – an emerging strategy for corporate- NGO partnerships and on employability skill training and targeted interventions for youth at risk.  The panels brought out some very valid points on how it was important, that corporate and NGO India link hands together for developing the workforce, and how important work force development was to the future of the nation. They discussed on how they should work together to keep this alliance alive and working. Some of the speakers discussed how  this partnership was reaching across regional and religious barriers and uniting everyone towards one cause. The initiative was launched after a presentation of the programme review by Nalini Gangadharan of the CAP Foundation, among the participation of representatives from corporate, development agencies, and government sector, some luminaries being Anjli Paul, daughter of industrialist Swaraj Paul, Diana Hayden, Former Miss World, Dr C R Naidu, IG Police, Andhra Pradesh, Prof P V Indiresan, Former Director, IIT Chennai, Dana Fischer, Director-Office of Social Development, USAID India, Shakti Sharma, Secretary, Tata Steel Rural Development Society,  Surina Rajan, Project Director, International Labour Organisation (ILO), representatives from SARD and American Indian Foundation, representatives from prestigious B- Schools Amity and XIM- Bhubaneswar, Jamia Milia Islamia, and IIT Delhi, corporate representatives of Pepsico, Genpact, Moserbaer, etc. CAP has been providing a consistent effort in learning and workforce development through some of its flagship projects like Child centered community based development programme, the Teen Channel, the Ek Mouka employability training programme, etc. The successful implementation by the Foundation has shown that more sustainable and holistic development of children is possible through integrated multi modular interventions related to learning habits and livelihoods through Child Centred Community Development modules. The Teen Channel is a community learning centre initiative, that attempts to connect learning and livelihoods in a model that addresses critical issues affecting the quality of life and future of adolescents who opt out of school as well as potential drop-outs among school going adolescents between the ages 13- 17 years in an enabling environment of educational, social, life skills, recreational and workplace readiness. The primary goal of 'Ek Mouka' is to provide access to market oriented livelihood opportunities to the disadvantaged youth and women through locally sustainable livelihood hubs. The Employability Exchanges that are established through this project are dynamic sustainable livelihood hubs that provide for exchange of resources, opportunities and competencies between business and communities that contribute to long-term sustainable local economic development.  ICT is an integral component of the 'EK Mouka' employability skill training programme. The Employability Centers use computers, projectors and other audio visual equipments to impart training. Not only that, CAP is extensively working on digitising its content, quite a few modules have been digitised and are being tested in the classrooms. These will enable the facilitators to deliver the modules better, and also help the students in self training, and later in refreshing their modules as and when needed. CAP is also working on setting up studios and transmission systems, whereby, the students will be able to either see pre-recorded sessions and maybe  even live sessions over a period of time. CAP Foundation realises the importance of technology and equips all its trainees with basic computer operations skills. The Objective of the recent launch of the workforce development initiative is to enable self directed growth of disadvantaged youth by providing easy access to market oriented employability skills and through setting up of institutionalised mechanisms for Public Private Partnerships. The road ahead consists of a four sequenced strategic objectives for the purpose-  1. Enabling the disadvantaged youth, especially young women to access increased and equitable participation in the expanding work force. 2. Customised, contemporary and quality training for market oriented work force development by setting up an institutional mechanism to build competency levels of trainers and capacity building of partners to sustain the training programmes and the employability centres. 3. Institutionalised programme interface with industry, relevant government and other institutions for placement, accreditations, certification and resource mobilisation.  4. Mainstreaming of the programme model and its best practices (processes, procedures, partnerships and pedagogy) to positively influence policy and regulatory barriers and promotion through research, advocacy and networking.  With the launch of the initiative, the Foundation foresees an accomplishment of its vision, to be an end-to-end community based solutions provider in linking quality learning and sustainable livelihoods for vulnerable communities of children and young people.

Microsoft India announces two new grants to CAP Foundation

Microsoft India announces two new grants to CAP Foundation

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Under the Unlimited Potential vision, Microsoft Corporation India Private Limited today announced an additional funding of Rs. 1.61 crore to CAP Foundation through its Community Technology Skills Program (CTSP) to promote IT access and training to communities vulnerable to unsafe migration and human trafficking. This announcement was made at a valedictory function for graduates of CAP Foundation training courses, attended by senior representatives from Microsoft, CAP Foundation and USAID/India. Addressing one of the root causes of unemployment in India, CAP Foundation provides employability skills training and economic empowerment to individuals and youth in at-risk communities.

Speaking at the event, Nancy Anderson, Corporate Vice President and Deputy General Counsel, Microsoft Corporation, USA said, “Access to information and communication technology holds tremendous potential to be the change agent for creating a more equitable order of economic opportunities and sustainable development. Every life that Project Jyoti - our Community Technology Skills Program in India - has helped transform through IT skills training is a testament to this. I am glad to deepen the engagement with our partner CAP Foundation for continuing to reach out to underserved individuals and changing lives”.

In his comments, Mr. George Deikun, Mission Director, USAID/India, said, “USAID is privileged to be a part of this very exciting initiative which links learning with livelihood. It is revolutionizing the way vulnerable youth, who have little prospect of employment, are mainstreamed into society”.

Expressing her views, Ms. Nalini Gangadharan, Chairperson, CAP Foundation, said, “Under the Microsoft and USAID-supported program, disadvantaged youth acquire basic IT skills, technical domain skills in fast expanding sectors, as well as life skills. It is a concrete step in positively changing the course of an individual’s life”.

Microsoft has so far partnered with 13 NGOs for on-the-ground CTSP program implementation in India, supported close to 900 Community Technology Learning Centres (CTLCs) across the country, and trained more than 120,000 people in approximately 20 states and Union Territories in IT skills based on the Unlimited Potential curriculum.

Under the grants announced by Microsoft, for phase II of an ongoing anti-human trafficking project, CAP Foundation will get Rs 1.18 crores in cash, software and curriculum across 30 training centres focusing on high migration and trafficking pockets in 15 states and union territories. A total of 44,800 at-risk youth from economically disadvantaged communities especially vulnerable to trafficking will receive IT and other skills training over three years. Most significantly, 80% of them are expected to be placed in jobs. This continues the momentum of phase I (2006-2008) of the project which was supported by USAID and QUEST Alliance for digitization of life skills content for improved delivery of the training. 

A second project for IT skills training of Overseas Workers to assist their safe migration will get Rs 42.53 lakhs in cash, software and curriculum donations from Microsoft for 3 training centres in Hyderabad, Chennai and Ranchi. Around 6000 workers who have made the decision to migrate overseas for employment and are registered with Overseas Migration Corporations or similar agencies in India will receive pre-migration related employability skills training, certification and placement assistance. In addition to enabling professional advancement and safer, more informed migration, technology training will also help overseas workers transition more easily to life overseas and remain in closer contact with their families back home via use of ICT.