Mumbai, India - India's Satyam Computer Services Ltd. (ADR) (NYSE: SAY) tumbled more than 70 percent on Mumbai's stock exchange on Wednesday after the founder and chairman of the country's fourth-largest software exporter stepped down as he admitted commiting a fraud by manipulating accounts over the period of last several years.

Satyam, which is also listed on the New York Stock Exchange under ADR category, had inflated its profit, forcing 53-year-old Chairman B. Ramalinga Raju to resign from his postion on Wednesday.

In a letter issued today to the Securities and Exchange Board of India (SEBI), India's market regulator, Raju has acknowledged that he falsified accounts and assets of 50.4 billion rupees ($1.04 billion), by understating a liability of 12.3 billion rupees, and overstated debtors' position of 4.9 billion rupees.

In the second quarter, ending September 30, the company reported a revenue of 27 billion rupees and an operating margin of 6.49 billion rupees (24 per cent of revenues) as against the actual revenues of 21.12 billion rupees and an actual operating margin of 0.61 billion rupees (3 per cent of revenues). Raju said that this has resulted in artificial cash and bank balances going up by 5.88 billion rupees in the second quarter alone.

Moreover, the accounting minipulations could have been carried out for several years as the company cannot just survive on 3 percent margin profit.

"The gap in the balance sheet has arisen purely on account of inflated profits over a period of last several years (limited only to Satyam standalone, books of subsidiaries reflecting true performance)," Raju wrote in the letter. "What started as a marginal gap between actual opera ting profit and the one reflected in the books of accounts continued to grow over the years."

The Securities and Exchange Board of India said Wednesday that it has forwarded the letter from Satyam to Ministry of Company Affairs (MCA) and is discussing the legal actions that could be taken against the company and the auditors.

"This event is a first of its kind in India and we need to learn a lot from this," Sebi Chairman C B Bhave was quoted as saying by the Economic Times, a local newspaper.

"We are already in touch with the stock exchanges and the ministry (MCA)," Mr Bhave added. "We also need to check whether the audit was done properly," he said.

PricewaterhouseCoopers, which is the biggest of the Big Four accounting firms, was the statutory auditor for Satyam Computer, the newspaper said.

As the scam was unraveled on Wednesday, shares of Satyam plunged deep into red by more than 70 percent, pushing down India's Sensex or Sensitive Index as much as 5.9 percent to 9,729.56 points in afternoon trading.

“This is a black day for India, the software sector and corporate governance claims,” Mumbai-based Arun Kejriwal, founder of Kejriwal Research & Investment Services, told Bloomberg News. “If at all there’s an event that could be the biggest setback for corporate India, it is this.” Raju said in his letter that out of the reported cash and bank balances of 53.61 billion rupees on Sept. 30, 50.4 billion rupees was non-existent.

"As the promoters held a small percentage of equity, the concern was that poor performance would result in take-over, thereby exposing the gap," Raju said. "It was like riding a tiger, not knowing how to get off without being eaten."

"I am now prepared to subject myself to the laws of the land and face consequences thereof," he added.