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Indian IT bubble bursts, almost

Satyam fails to adhere to truthful working, admits to gross obfuscation

Founder director resigns and submits to law 

WSN Bureau

HYDERABAD: What was expected in the last few days has happened. No one could have stopped it. Ultimately it was admission by none other than the founder-chairman, Ramalinga Raju who revealed more than $ 1 billion in fictitious reserves, because as he said, "the gap in the balance sheet has arisen purely on account of inflated profits" during the last several years.  The future of about fifty thousand employees is at stake as the company management seeks mergers to bail it out of an unprecedented crisis.

Fearing the worst, particularly because of the euphoria that the company had whipped up over the years, he tamely said that he would "face the consequences" though he pointed out that neither he nor his families were beneficiaries.

This development has hit the Indian corporate world with IT giants like WIPRO and Infosys reacting by saying that, "it is time to sit up and wake up." 

The chairman and his brother B. Rama Raju, attempted to buy out companies to puff up their financial strength but an early media expose put that at rest.

The Securities Exchange Board of India and the NYSE are likely to initiate action against the company.  

As this downfall is likely to have a spiral effect and whether this would be the beginning of the end for the Indian IT sector, only time will tell.

7 January 2009
 

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