Companies
Satyam hangover: The chaos inside a tech firm with family link to Ramalinga Raju
Summary
- Ramalinga Raju, the main accused in the Satyam Computer financial scam, is only referred to as a ‘mentor’ in a technology solutions company that lists his son and other family members as shareholders.
- The company recently laid off about 1,500 employees and hasn’t paid salaries for months.
Fifteen years after Byrraju Ramalinga Raju confessed to a $1.5 billion accounting fraud at Satyam Computer Services Ltd, a family business he “mentored" into existence is in trouble over unpaid salaries, mass layoffs, and delayed tax dues.
Brane Enterprises Pvt. Ltd, which lists the disgraced entrepreneur’s younger son Byrraju Rama Raju as a significant beneficial owner, recently laid off more than 1,500 employees and has delayed paying salaries for the last three months.
The Hyderabad-based technology solutions company also delayed transferring tax deducted at source from employee salaries and money towards their provident fund accounts, according to employees and documents that Mint has reviewed.
While the company’s management has informed employees that it will settle their dues by 12 August, there’s a sense of mistrust due to similar assurances that went unfulfilled.
“We were told there would be no layoffs and then they went for mass layoff and removed us from the systems," said an employee recently laid off, requesting anonymity.
Also read | More businesses face regulatory heat on beneficial ownership
Adetya Agarwal, chief executive of Brane Enterprises, confirmed the layoffs and salary delays.
“Due to significant delays in certain customer realisations coupled with the delays in incoming investments, Brane had deferred certain salary payments over the last two months," Agarwal told Mint in an emailed response.
“As a conscious decision to prevent widespread disruption and ensure the financial well-being of all the employees, Brane had no choice but to make the difficult decision of closing down certain new initiatives. Consequently, garden leave was provided to employees involved in those initiatives, allowing them to seek suitable opportunities elsewhere," Agarwal added.
“While Brane is taking all steps to clear their dues this month as already communicated to them over email, Brane has already cleared all dues pertaining to their income taxes and provided computation statements to them to file their tax returns in July 2024."
He who cannot be named
Brane Enterprises was incorporated seven years ago as Fractal Enterprises. According to the company, it had more than 3,000 employees globally before the recent layoffs.
Data sourced from research platform Tofler show the company’s revenue surged to ₹15 crore in 2022-23 from ₹1.2 crore in the previous year, while its loss doubled to ₹60 crore from ₹30 crore.
Ramalinga Raju’s association with Brane Enterprises is intriguing. While he is not overtly identified with the company, internal documents reveal he was associated with it as a ‘mentor’. According to half a dozen employees Mint spoke with, Raju is referred to as ‘mentor’ within the company.
“It’s eerie but he was always treated as someone who should not be named and all employees went along with it," said another employee who was also laid off.
“On behalf of the investors, Mr. Ramalinga Raju is mentoring the organization for the launch of NSL runtime," states an internal company policy document that Mint has reviewed.
NSL Runtime, according to the document, is a product owned by Brane Cognitives Pte Ltd, Singapore, a subsidiary of Brane Enterprises Pvt. Ltd, India.
“The inventor [of NSL Runtime], Mr Ramalinga Raju, is the mentor for the organisation and its leaders and shall guide the process of building Brane," states the document. “Managing Partners Adetya Agarwal and Bhavani Shankar, under the guidance of Mentor, form the Operations Task Force."
Ramalinga Raju’s email address associated with Brane Enterprises does not include his name but has the term ‘mentor’.
The Satyam Computer founder would be in the office once a month or a quarter for ‘mentoring sessions’ that were mandatory for all employees to attend, according to the two employees quoted earlier.
Also read | Significant beneficial owners and what the govt wants to know
Company filings sourced from the Ministry of Corporate Affairs mention Ramalinga Raju as the father of Brane Enterprises’s significant beneficial owner, Byrraju Rama Raju. The document also mentions Deepthi Byrraju and Rahul Raju Byrraju, Ramalinga Raju's family members, as shareholders.
The company’s website does not mention any of these individuals.
Ramalinga Raju did not respond to queries sent to his official email address and on WhatsApp. Agarwal did not comment on Ramalinga Raju’s association with the company despite multiple follow-ups over email.
The ghost of Satyam
The Satyam Computer Services scandal of 2009, also known as India’s Enron, remains one of the largest corporate frauds in India. Founder B. Ramalinga Raju, until then an iconic figure in India’s tech industry, stepped down as chairman confessing to manipulating the Hyderabad-based company’s finances over several years.
The fraud involved inflating revenue and profit over several years in an accounting fraud to the tune of ₹7,136 crore, or about $1.5 billion at the time.
Ramalinga Raju was sentenced to prison for seven years but later granted bail. Satyam Computer was eventually acquired in a government-orchestrated auction by Tech Mahindra Ltd. (Read: Can Mohit Joshi catapult Tech Mahindra into the big league of Indian IT?)
In December, the Securities and Exchange Board of India ordered Ramalinga Raju and four other former executives of Satyam Computer to pay ₹1,747.5 crore, which included ₹624 crore of unlawful gains and ₹1,123 crore of interest accrued on it for about 15 years.
Lawyers said that given Ramalinga Raju's implication in the Satyam scam, it was prudent to not have him directly associated with Brane Enterprises.
“As a shareholder and if you are a promoter of the company, tomorrow if something wrong was to happen, you will be roped in the whole thing. History may act against one in that case. However, facts of each case will determine the culpability," said Manendra Singh, partner at Economic Laws Practice.
Also, “if you were to raise funds, be it from public or any investor (foreign or domestic), it can become an issue since investors do their diligence on people in the management".
