Bangalore: Byrraju Ramalinga Raju, 54, chairman of Satyam Computer Services Ltd and lover of science fiction works by Isaac Asimov and Arthur C. Clarke, will be remembered in Indian business history—not the way he would have wanted, as a successful software entrepreneur, but as the perpetrator of the country’s biggest corporate fraud, one that saw his company resort to fiction to burnish its performance.
It used to be said that Hyderabad had two major landmarks: the Charminar and Ramalinga Raju, who created the company, Satyam Computer Services. Satyam means truth, but Raju, who resigned as chairman on Wednesday, owned up to creating a tissue of lies.
Ramalinga Raju belongs to a family of farmers from Bhimavaram near the Andhra Pradesh city of Vijayawada. His father, Satyanaryana, helped create the family fortune in a small way, shifting in the early 1960s to Hyderabad and starting a textile business even as he bought more land for farming. Ramalinga Raju has in the past said that it was his father who inspired him to start Satyam.
Ramalinga Raju recently told Business Today magazine that after returning from the US with a master’s in business administration (MBA) degree from Ohio University, “I had all the enthusiasm and passion to do something…of being an entrepreneur. A friend told me about a part-time teaching opportunity at the Administrative Staff College of India. This really appealed to me. But, in late 1977, over dinner one night, my father told me: It is always important to stay focused and to avoid distractions.”
Ramalinga Raju chose to enter the relatively new business of providing software services to international customers from India. Satyam, launched in 1987, started offering such services initially onsite to tractor maker John Deere and Co. In 1991, the company raised money through a share sale and listed on the Bombay Stock Exchange.
It was in 1994 that Satyam got its big break when it allied with Dun and Bradstreet Corp. The partnership was short-lived, but by the time it ended, Satyam was well on its way to growth.
What separated Satyam from rivals such as a Tata Consultancy Services Ltd or an Infosys Technologies Ltd was Raju’s preference for executives and associates who spoke the same language he did: Telugu.
“For Raju, family, caste and those who could speak Telugu came first. I am not saying he was not a professional, but other things being equal, he would look at things in that order,” said a former employee of Satyam Infoway Ltd, the Internet firm Raju eventually sold to a non-resident Indian entrepreneur, Raju Vegesna.
Raju’s brother Rama Raju was managing director of Satyam and till 2000, his brother-in-law Chinta Srinivasa Raju used to head a key division.
“At one point of time there were so many Rajus (in the company) that it would be difficult to identify who was who,” said an executive at a software firm, who did not want to be identified.
Raju’s food preferences were also local—he preferred spicy Andhra food, though he admitted to this writer once that he also liked hot Thai food.
Raju was always keen on other businesses, and the controversy over Satyam’s attempt to buy two Maytas companies wasn’t the first such he faced.
In 1998, the publicly listed Satyam Computer Services had to declare that it would not invest in Satyam Constructions Ltd, a family-owned company, after news reports to that effect roused investor ire. Satyam had also floated a clutch of companies, including one for the Internet (Satyam Infoway) and to address large customers (Satyam Enterprises). At various points of time, these were either merged back into the parent or spun off and sold.
In 2000, at the height of the dot-com bubble, Satyam Infoway paid Rs500 crore to Rajesh Jain-owned IndiaWorld, which was essentially a clutch of websites. In 2001, Satyam Computer Services listed on the New York Stock Exchange (Satyam Infoway did so on Nasdaq in 1999).
With the real estate sector booming, the Rajus re-entered the business. Maytas Properties Ltd (Maytas is a palindrome for Satyam) and Maytas Infra Ltd were looked after by Raju’s sons Teja Raju and Rama Raju. Maytas Infra even won the Hyderabad Metro rail project. Satyam, however, had to cope with tough competition and a tougher business environment. The company also had to meet analyst and investor expectations.
In a letter to Satyam’s board on Wednesday, Raju confessed to having cooked the company’s books and overstated revenue and profits. He added that Rs5,040 crore of the cash that is supposed to be on Satyam’s books simply doesn’t exist.
Srini Raju, who stepped down as executive director of Satyam in 2000, said Raju’s revelations came as a surprise to him. He now runs Peepul Capital Llc., which has $325 million (Rs1,580 crore) of funds under management. He also runs news channels in several languages under the TV9 brand.
“I am shocked and yet to digest what has happened,” Srini Raju said. “Satyam Computer is one of the iconic companies of Indian software industry and fudging of accounts by such a company will have a very high impact on the industry as a whole.”
Raju must have known this as his letter indicates. His letter refers to “the tremendous burden on my conscience” and likens Satyam’s descent into financial purgatory to “riding a tiger”.
C.R. Sukumar contributed to this story.