Seems like a repeat of Enron has struck in India – dropping the Indian share market by approx 7%.

Satyam (which in India means “Truth”) released information that over the past few years the company’s profits were over-inflated. In fact, nearly US$1 billion in the company’s book is fictitious – summing up to nearly 95% of the company’s cash.

Founder and Chairman, Ramalinga Raju said that none of the other board members were aware of this fraud. He said “it was like riding a tiger, not knowing how to get off without being eaten”. He will be facing some legal action and says that he is prepared for it.

Some say more companies will soon unfold as people believe that similar companies have inflated their profits. PriceWaterhouseCoopers, are the auditors for Satyam and had nothing to say about this matter.

With this recent event, it is unlikely that people will continue to outsource to India and further investments in this country will be thought about twice. It also questions the corporate governance in their lack of scrutiny on this matter.

With the way India works in terms of it’s bribery and false release of public information – I’m not surprised that they have gone this far. But I do wonder why they eventually cracked.

Satyam share prices dropped nearly 80% after the above information was released.