On Wednesday Satyam Computer plunged into a deep disaster, as B Ramalinga Raju resigned as its Chairman after admitting to main economic wrong-doings and saying his last-ditch hard work to fill the pretended resources with real ones through Maytas acquisition failed.The under pressure IT giant, already under scanner over the aborted acquisition of firms promoted by the Chairman’s family, received a impolite upset days ahead of its January 10 board conference, with Raju stepping down along with his brother and Managing Director B Rama Raju.

‘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 most important financial wrong-doings over the years to increase the earnings.

Listed at New York Stock Exchange, the company could face rigid action in the US, analysts said. While Raju suggested DSP Merrill Lynch be entrusted the job of rapidly exploring few union opportunities,’ the company informed the stock exchanges that the investment banker has ended its engagement with Satyam.

Noting that all effort to eliminate gaps in balance sheet, entirely on account of inflated earnings over a number of years, failed, Raju said: ‘I am now prepared to subject myself to the laws of the land and face  consequences thereof.’

Low proportion of supporter 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’ contribute in Satyam has now curved in to just above 3 per cent that too is pledged with lenders. Shares of Satyam plunged by over 40 per cent right away after the declaration of resignations, necessitating an overhaul of the Board and management.

Raju will carry on as Chairman till the Board finds a alternate, even as assumption was common that Satyam President Ram Mynampati would take over as Chairman.

Rama Raju would also go on as Managing Director, but only till the time the Board is extended.

Ramalinga Raju requested the Board to clutch jointly to take some vital steps, while hoping that one of the Board members T R Prasad was well-placed to mobilize support from the government at this essential time.

Satyam is the country’s fourth leading IT firm and has more than 51,000 employees. Giving facts of the financial irregularity, Raju said the company’s balance sheet as of September 30 carries exaggerated (non-existent) cash and bank balances of Rs 5,040 crore (as against Rs 5,361 crore reflected in the books.

‘The balance sheet also carries an accrued interest of Rs 376 crore which is missing, an understated liability of Rs 1230 crore on account of funds approved by me (Raju), an showy debtors position of Rs 490 crore (as against Rs 2651 crore reflected in the books,’ Raju said.

He further said that Satyam reported a profits of Rs 2700 crore for the September quarter and an working margin of Rs 649 crore (24 per cent of revenue) as against the real revenue of Rs 2112 crore and an real working margin of Rs 61 crore (3 per cent of revenue).

‘This has resulted in artificial cash and bank balances going up Rs 588 crore in Q2 alone,’ Raju said.

‘The gap in the Balance Sheet has arisen simply on account of exaggerated profits over a period of last some 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,’ Raju further said.

‘It has attained unmanageable proportions as the size of the company operations grew significantly… 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,’ he
said.

‘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,’ he said.

Raju, on the other hand, claimed that neither he, nor the Managing Director(including our spouses) sold any shares in the previous eight years-excepting for a little amount stated and sold for charitable purposes.

Raju further said he or the company’s MD did not take even one rupee/dollar from the company and have not benefited in economic conditions on account of the exaggerated results.