BackSatyam to invite investor proposals amid scepticism about clients
Satyam to invite investor proposals amid scepticism about clients
Premium
Hyderabad: The board of Satyam Computer Services Ltd is in the process of inviting formal proposals from entities which have shown interest in investing in the software company at the centre of India’s biggest accounting fraud.
“Our investment bankers, Goldman Sachs and Avendus (Capital), will shortly define the process of the first stage—inviting proposals from the suitors, which will be transparent and investor-friendly," Satyam’s new chairman Kiran Karnik said.
Engineering services company Larsen and Toubro Ltd, the information technology arm of Mahindra & Mahindra Ltd, B.K. Modi’s Spice Group and the London-based Hinduja family have shown interest in acquiring Satyam, whose founder B. Ramalinga Raju on 7 January confessed to having doctored its accounts to the tune of at least Rs7,136 crore.
Larsen and Toubro increased its stake in Satyam from 4% to 12% after the scandal surfaced. Market regulator Securities and Exchange Board of India said recently that it was willing to amend takeover regulations to allow easier acquisitions in special cases like that of Satyam.
Some analysts say that suitors will wait until Satyam’s accounts are restated before deciding to actually put any money in the company. On when the restated numbers would be declared, Karnik said: “They (auditors) have to go back several years to see where the funds came from, where and since when they were (being) diverted, the exact amount of revenue and so on... That’s not an easy task and is likely to take time."
Raju, his brother and former Satyam managing director B. Rama Raju and former chief financial officer Srinivas Vadlamani were arrested following the founder’s confession.
Satyam was India’s fourth largest computer services firm, employing at least 52,000 people (a number that Hyderabad-based prosecutors say was inflated) and with at least 650 clients. The company, which has been scrambling to assure clients that it would survive the crisis, claims to have won new customers.
“Last week, one of the global leaders in the networking space for consumers and small business users awarded a large contract to Satyam. Spanning six months, the project will be executed through a 20-member onsite and offshore team," said a Satyam newsletter called News Today released on 2 February, which did not specify whether it was an existing client or a new one.
On 3 February, AFP reported, citing a spokeswoman who didn’t want to be named, that Satyam had “won 15 new clients in January".
“(I) think it’s new projects from existing clients," rather than new clients, Karnik told Mint, adding that he was not aware of the exact details of the new projects the company had won in January.
A US-based insurer and Fortune 500 company, State Farm Mutual Automobile Insurance Co., terminated its contract with Satyam in January. According to a Mumbai-based analyst who did not want to be named, it was one of the top 10 clients of Satyam. The United Nations removed Satyam from its vendor list in January. The World Health Organization last week said that it is watching the developments at Satyam, one of its technology vendors.
Satyam executives were themselves sceptical about the claims that the company had won new clients.
“From what I understand, it’s new projects from existing clients or expanded scope for ongoing projects. It is difficult to believe that a new client would want to sign a contract with Satyam now," said a middle-level management professional at Satyam. He requested not to be named, as he was not a designated spokesperson.
Analysts were equally sceptical. “In (the) outsourcing sector, signing a new deal takes anywhere from 3-6 months and in the current scenario, it is difficult to imagine a new client signing a fresh contract with Satyam at this point," said Arvind Pandit, director at consultancy Hay Group.
lison.j@livemint.com
PTI contributed to this story.
Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it's all here, just a click away! Login Now!
