Satyam chairman admits to £682m fraud

Satyam chairman Ramalinga Raju has admitted inflating profits for seven years

The chairman of Satyam, one of India's largest outsourcing providers, has resigned after admitting to inflating profits for seven years, amounting to a sum of 50.4bn rupees (£682m).

Ramalinga Raju's fraud has caused shock and dismay throughout the Indian outsourcing industry, while bringing back memories of Enron in the US.

Analysts have suggested that the case is likely to cause increased scrutiny of Indian companies, and that investment could be affected.

Satyam's stock has collapsed by more than 60 per cent, and reports claim that Merrill Lynch has terminated its contract with the company.

Raju's admission comes at a particularly dark time for Satyam. In December 2008, the World Bank blacklisted Satyam for eight years, accusing the firm of offering indecent benefits to the bank's staff.

In a letter addressed to the Satyam board, Raju described his "deep regret" and the "tremendous burden" he carried on his conscience. "It was like riding a tiger, not knowing how to get off without being eaten," he said.

According to Raju, the gap in the balance sheet arose purely due to inflated profits. "The company had to carry additional resources and assets to justify a higher level of operations, thereby significantly increasing costs," he said.

Raju also said that a planned acquisition of property development business Maytas, which has now been aborted, was the "last attempt to fill the fictitious assets with real ones".

Ending the letter, Raju declared: "I am now prepared to subject myself to the laws of the land and face the consequences."

Raju maintained throughout his confession that he had not attempted to profit personally from his actions, and that none of the board members had been aware of what went on.

"I sincerely apologise to all Satyamites and stakeholders, who have made Satyam a special organisation, for the current situation," he added.

Satyam chief operating officer Ram Mynampati, who has been made interim chief executive, warned of tough times ahead in a response to Raju's letter.

"We are confronted with the challenge of continuing our business operations seamlessly," he said. "Increased focus on transparency at all levels, integrity and ethical functioning will be ensured."