Bangalore: The software company at the centre of India’s biggest corporate fraud investigation, Satyam Computer Services Ltd plans to start the search for a strategic investor this week, chairman Kiran Karnik said on Tuesday.
“We are hoping this week it should all be set and sorted,” Karnik said over the phone. The Hyderabad-based company would like to be ready to invite expressions of interest from bidders as soon as the sale plan is approved by regulators, he said.
A sale may help restore investor confidence in Satyam and stem client defections after former chairman B. Ramalinga Raju, who has since been arrested, said on 7 January that he doctored the company’s books to the tune of at least Rs7,136 crore, triggering a 75% slump in the stock. Satyam’s government-appointed board is going ahead with the bidding before the fraud probe is complete or the company has restated its accounts.
International Business Machines Corp. (IBM), the world’s largest computer-services provider, and Larsen and Toubro Ltd (L&T), India’s largest engineering firm, are the leading contenders to buy Satyam, Global Equities Research Llc. said in a report on Tuesday.
Karnik declined to name any possible bidders. Prashanth Balarama, a Bangalore-based IBM spokesman, said the company doesn’t comment on rumours and speculation, and Deepak Morada, a Mumbai-based L&T spokesman, declined to comment.
Customers may have asked Satyam for a quick resolution of the sale, Trip Chowdhry, managing director of equity research at Global Equities, wrote in the report, citing unidentified people. Clients may prefer to stick with Satyam as switching service providers can take up to a year, involve expenses and disrupt operations, he said.
Satyam’s stake sale plan was approved by the Company Law Board last week and the company’s board said on 21 February it would seek regulatory approval for the plan early this week. The software provider may sell at least a 26% stake to the winner of an open bidding, the law panel indicated.
Satyam will share as much financial and customer information as is legally permissible with bidders, Karnik said. Without sharing specific names or the value of their contracts, Satyam may disclose details such as the business areas of clients, their geographical distribution and the total value of orders, he said.
“We want them to invest and it’s only fair that we share all the information that we can share,” Karnik said. “There’s not going to be anything held back except on legal grounds.”
The board, which arranged funds to tide over a cash shortage, pay salaries and run the business, is keen to conclude the stake sale as soon as possible, Karnik said.
Bidders may have to also face some uncertainties about the extent of the company’s liabilities as the restatement of accounts will take a long time, he said.