The chairman of India’s Satyam Computer Services Ltd. quit Wednesday after admitting the company’s profits had been inflated for several years, sending shares of the software services provider plunging by more than 70 percent.
The news dragged down the benchmark Sensex stock index 7.3 percent to 9,594.47.
The company’s balance sheet was loaded with “fictitious” assets and “non-existent cash,” Chairman B. Ramalinga Raju said in a letter to the board, which was released to the Bombay Stock Exchange.
Satyam, which employs about 53,000 workers, had “inflated profits over a period of (the) last several years,” Raju said. Its shares crashed 71 percent to 51 rupees.
Raju said that none of the other board members had any knowledge of the fraud. He apologized to all stakeholders in his letter and claimed that he had not benefitted from the doctored results.
B. Rama Raju, managing director of Satyam Computer and the chairman’s brother, also quit.
“Neither me, nor the managing director took even one rupee/dollar from the company and have not benefited in financial terms on account of the inflated results,” the chairman said in his letter.
The accounting scandal raises questions about the quality of corporate governance in India and is likely to reverberate around the region.
The Securities and Exchange Board of India, the market regulator, said it was investigating.
“We have to go beyond this letter and find out what actually has happened,” SEBI chief C.B. Bhave told reporters. “This is is an issue which has very serious implications. It involves the Companies Act and the violation of the listing agreement with SEBI. It also raises the issue of authenticity of accounts that have been audited and certified by the auditors.”