Raju's fraud admission sends shockwaves through India Inc.

Raju admitted on Wednesday that the company had reported revenue of Rs.2700 crore against the actual revenue of Rs.2112 crore for the quarter ending September 30, 2008 (Q2). The reported operating margin was Rs.649 crore (24 percent of revenues) against an actual operating profit margin of Rs.61 crore (3 percent of revenues).

In addition, he had understated the company's liability of Rs.1230 crore and had overstated debtors' position, thereby inflating the company's cash and bank balances on the balance sheet by Rs.5040 crore.

Raju said the manipulation in the accounts had been going on for several years. "What started as a marginal gap between actual operating profits and the one reflected in the books of accounts has attained unmanageable proportions," Raju said, adding that it had assumed such gigantic proportions that he felt "it was like riding a tiger, not knowing how to get off without being eaten."

Raju said the fraudulent figures had attained unmanageable proportion as the size of the company grew and every attempt to eliminate the gap failed. The aborted Maytas acquisition by Satyam was the last attempt to fill the fictitious assets with real ones, he said.

The embattled chairman said he took the decision to inflate the profits, as he was concerned that a poor performance, combined with the fact they held a small stake in the firm, would make Satyam an easy target for a takeover. But his attempts to "keep the wheel moving" at Satyam finally ended in vain when institutional lenders sold most of the pledged shares because of margin calls, Raju said.

The disclosure has sent Corporate India into deep shock and disbelief and the courageous few said this is the right time for implementing stricter corporate governance norms.

In a statement, National Association of Software and Service Companies or NASSCOM, the consortium that serves as the apex body of the Indian IT and BPO industry, said the massive accounting fraud committed by Raju is an instance of failure of corporate governance.

"While the law will take its course, this incident is particularly unfortunate as the Indian IT-BPO industry had set very high standards of ethics and corporate governance," NASSCOM said, adding that this is a standalone case of failure of such failure and it is critical that it be viewed in this light.

"We are sure that all the stakeholders would also treat this as an isolated issue and does not in any manner a reflection on the industry or Corporate India," it said, adding that it would cooperate with the existing Satyam board to reach out to their customers and employees and guide them through the difficult period of transition.