Satyam Chairman Admits Fudging Profits

By Muneeza Naqvi

NEW DELHI -- The chairman of India's Satyam Computer(SAY Quote) quit Wednesday after admitting the company's profits had been doctored for several years, shaking faith in the country's corporate giants as shares of the software services provider plunged nearly 80%.

The company's balance sheet -- riddled with "fictitious" assets and "non-existent" cash -- contained a $1 billion hole that could no longer be concealed after a deal intended to save the struggling company was scuppered, Chairman B. Ramalinga Raju said in a letter to the board.

"Every attempt made to eliminate the gap failed," said Raju. "It was like riding a tiger, not knowing how to get off without being eaten."

B. Rama Raju, managing director of Satyam Computer and the chairman's brother, also quit.

News of the fraud dragged down the benchmark Sensex stock index 7.6% to 9,546.78 with Satyam's shares plummeting 77% to 40 rupees. The accounting scandal raises questions about the quality of corporate governance in India and is likely to reverberate around the region.

Satyam, which means "truth" in India's ancient Sanskrit language, had "inflated profits over a period of (the) last several years," Raju said in his letter, which was released to the Bombay Stock Exchange.

For the July-September quarter alone, operating profit of $133.4 million had been overstated by almost 11 times the actual result.