Surviving Satyam

On October 6, 2008, Verghese K. Jacob received a routine cheque of Rs 1 crore from the Raju family, the founders and original promoters of Satyam Computer Services. Little did he realise that it would be the last cheque he would receive for the Byrraju Foundation, set up by the family in July 2001. "In January 2009, just a week after the confession of Satyam Chairman Ramalinga Raju, it was very clear that there would be no funds coming in and we braced ourselves for the worst," says Jacob, 55, the self-styled "Chief Integrator" of the foundation.

Beginning with the Raju family's hometown of Bhimavaram in the West Godavari district of Andhra Pradesh, the Byrraju Foundation, named after Ramalinga Raju's father, had adopted 200 villages across six districts in the state. Its ambitions were high and its reach wide. In effect, it was directly or indirectly impacting the lives of nearly three million people. Working as a cross between an NGO and a corporate social responsibility (CSR) operation, the foundation set up programmes in these villages related to healthcare, education, water and livelihood skills. The idea was to ultimately hand over ownership of programmes and institutions to local communities. These plans were funded by the princely monthly cheque from the Raju family, making it one of the biggest charitable foundations in the country.

PRE-SATYAM (2008) ANNUAL BUDGET: Rs 13 crore (excluding joint programmes with the government). SOURCE OF FUNDS: Rs 1 crore from the Raju family each month plus external donations from NRIs or philanthropists. OPERATIONS: 200 villages in 6 districts of Andhra Pradesh. FOCUS OF TIE-UPS: To undertake joint programmes and to develop competencies. PRIORITIES: To invest in knowledge creation through research and develop concepts like rural BPO. GOAL: To reach 300 villages in 3 years. APPROACH: Charity. POST-SATYAM (2010) ANNUAL BUDGET: Rs 3 crore. SOURCE OF FUNDS: Partners, local community contributions plus user charges. OPERATIONS: Active in 160 villages across 6 districts of AP. Partially active in 25 districts. FOCUS OF TIE-UPS: To share costs, fund programmes and build self-sustaining models out of existing programmes. PRIORITIES: To leverage knowledge already existing, like telemedicine technology, to deepen impact of current programmes. GOAL: To retain operations in current villages and deepen operations in existing locations, and gradually provide services by advising and aiding others to replicate this model elsewhere. APPROACH: Social entreprenuership.

But when the cheque stopped coming, restructuring became a daunting task. The first axe fell on overheads and non-revenue raising activities like research. The next step was to find ways to make the foundation's programmes self-sustaining. For example, Byrraju now collects up to Rs 200 per head for every livelihood programme depending on the type and duration. Efforts are on to link up the beneficiaries of these programmes with microfinance institutions, encouraging the communities to take loans directly from these institutions.

When the Satyam scam hit, the foundation suffered from a massive loss in manpower as well. A core base of 900-odd people dropped to around 600. A leadership team of 65, which guided the programmes, shrank to 35. Since those dark days, the foundation has tried to redress this lack of manpower in various ways, like training the local beneficiaries to take over the running of the programmes. Or, finding volunteers from among students of Indian B-schools as well as those from foreign institutions.

The foundation then approached high net-worth Non-resident Villagers (NRVs), who hailed from these villages and wanted to give back to their community. Close to 20 NRVs came forward, with each willing to give Rs 5,000-6,000 every month, which the foundation considers is enough to keep its operations ticking. One such NRV is K. Vijaya Kumar, Executive Director & CEO, KVK Energy. He hails from Podagatlapalli, a village in East Godavari district. He decided to sponsor the foundation's "Ashwini" programme, which works in the realm of healthcare, distance education, agriculture and job training for villagers. Says Kumar: "We realised that if an alternative route of funding was not put in place, there was a risk of losing whatever good the foundation had done." As a result, Kumar says, his contributions rose from around Rs 5-10 lakh each year to Rs 5 lakh every month.

This is a pretty hefty amount, which inevitably raises the question of ownership. Pre-2009, the foundation was headed by a Board of Trustees, comprising the three Raju brothers. Under them was a governing board of six members, headed by Jacob. Today, the trustees are gone and the governing board of four members is in charge. Steps are on to include 2-3 major donors like Kumar.

Each member gets a vote, while the four neutral members guard Byrraju's independence. According to Nandini Raju, wife of Ramalinga Raju, the family is supportive of the direction the foundation is taking.

Other than NRVs, the foundation looked for funds in each of the 200 villages it had adopted. In 140 villages, 100 households in each village volunteered to give Rs 50 per household every month. This assured the foundation another Rs 5,000 per month to continue operations there. Apart from these 140 villages and the 20 with the support of NRVs, operations had to be partially scaled down in 25 among the remaining 40 villages. Operations in 15 villages were stopped. Healthcare services were struggling for viability until the foundation entered into a partnership with the Hyderabad-based Care Hospitals, which agreed to fund healthcare for the next 10 years and also help with doctors.

The foundation's water plants and waste management projects in about 150 villages became viable only after it started charging for these services. Drinking water charges were raised from Rs 1.5 to Rs 2 for 12 litres, while households now pay Rs 5 each for garbage collection. The foundation even started selling organic manure made at its vermiculture plants for Rs 4 per kg against a production cost of less than Rs 2. Today, while 53 drinking water plants have been set up, about 170 villages possess waste removal systems. The foundation says some 260 schools, benefitting about 1 lakh children, will not suffer from a lack of funds as initial investments had already been made.

Byrraju also deepened its preexisting partnerships. The NASSCOM Foundation's programme to hone computer and English language skills increased from 5 villages to 32. Similarly, ISRO's satellite link programme for distance education and telemedicine in 18 centres is also set to expand further. That apart, Byrraju sold Gram IT, its innovative rural BPO operation, for an estimated Rs 1 crore to Sridhar Gadhi, Founder-President and CEO, Paradigm Infotech Inc., and a former Satyam employee.

The foundation had once envisaged increasing its spread to 300 villages by 2013, but the objective now is to retain and deepen operations in the existing ones. In five years, Byrraju hopes to become a consultancy that advises—and charges—companies and NGOs looking to replicate its programmes elsewhere. The foundation is clearly not out of the woods just yet, but the way forward is clear. "We have changed from a charity to a social entrepreneurship model and want to encourage others to replicate our programmes for rural transformation," says Jacob.