Satyam Computer Services, a leading Indian outsourcing company that works with more than a third of Fortune 500 companies, has been inflating its earning and assets, said Ramalinga Raju, Satyam's chairman and co-founder.
Raju resigned after admitting the company has been falsifying its earning reports for years and said that $1.04 billion the company listed had as assets in a September earnings report didn't exist. Revenues for the period were 20 percent lower than reported, and the company's operating margin was a fraction of what it declared, Raju said Wednesday in a letter to directors that was distributed by the Bombay Stock Exchange.
In the letter, Raju explained that "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."
The announcement coincided with a five percent drop in India's key Sensex index, and a 70 percent drop in shares of Satyam.
Satyam had been under close observation since October when it was banned from World Bank contracts after it was accused of installing spy software on several World Bank computers. In late December, analysts with Forrester Research warned that companies doing business with Satyam should review the exit clauses on their contracts.
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