Head of Indian IT firm resigns

Stocks of Satyam Computer Services plummet as chairman says he inflated company's profits for years.

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NEW DELHI, India (CNN) -- The chairman of India's fourth-largest software-services provider resigned Wednesday after confessing to inflating the company's profits for years with "fictitious" assets and nonexistent cash.

The news sent stocks of the Hyderabad-based Satyam Computer Services Ltd. into free fall. Stocks plummeted more than 70% within hours after the revelation.

The major stock index in India - the BSE SENSEX - fell 7.3% Wednesday.

Satyam employs 53,000 people, operates in 65 countries and serves almost 700 companies, including 185 Fortune 500 companies. More than half of its revenues come from the United States.

Satyam Chairman B. Ramalinga Raju said the balance-sheet padding began several years ago to close "a marginal gap" between actual operating profit and one reflected in the company's accounting books. It continued through the years, he said.

"It was like riding a tiger, not knowing how to get off without being eaten," Raju said in a letter to the company's board of directors.

Raju said no board member was aware of what he was doing and he did not profit from the inflated accounts.

The deception came to light after Raju tried to plug the hole by getting Satyam to buy his son's construction companies. The acquisition was "the last attempt to fill the fictitious assets with real ones," he wrote in his letter.

The deal would have cost Satyam $1.6 billion - but the company's board vetoed it.

Stocks fell following the botched deal. Soon afterward, Raju came clean, saying he was doing so "with deep regret, and tremendous burden that I am carrying on my conscience."

Analysts say Satyam is ripe for a takeover, and the government is expected to submit a formal report on the matter Thursday.

CNN's Bharati Naik contributed to this report.  To top of page

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