Hyderabad: Fraud-hit software services firm Satyam Computer Services Ltd invited prospective bidders on Monday to submit formal expressions of interest (EoIs) for acquiring a majority stake, setting the stage for a sale that would inject much-needed cash into the company and help salvage its future.
Inviting suitors: Satyam’s headquarters in Hyderabad. Noah Seelam / AFP
The Hyderabad-based firm gave bidders time until 5pm on 12 March for submitting the EoIs. Eligible bidders would be given access to Satyam’s businesses, and financial and legal records, to enable them to arrive at a valuation, the company said in a statement.
Under the sale process approved by the stock market regulator last week, the company initially proposes to offer a 31% stake to a strategic investor through a sale of new shares. The winning bidder would need to make a mandatory open offer to minority shareholders to buy an additional 20% at the same price to acquire a majority stake in the company.
In case the investor is unable to take the stake to 51% after the open offer, the company is offering the option of subscribing to fresh equity capital through another preferential sale, to be completed within 15 days from the close of the open offer.
The sale is crucial for Satyam, which has been at the centre of India’s biggest corporate fraud after founder B. Ramalinga Raju on 7 January confessed to having doctored its accounts to the tune of Rs7,136 crore over a period of several years.
A strategic investor could help the company retain clients, win new orders and restore the shaken confidence of investors.
The Satyam stock gained 15.78% to close at Rs48.75 on the Bombay Stock Exchange on Monday, a day the BSE IT index lost 2.27% to close at 2,025.30 points. Satyam gained as much as 19% intraday, valuing the company at Rs3,390 crore. The stock had surged 20% on 6 March.
Bidders need investable funds of at least Rs1,500 crore under the criteria specified by Satyam. The company has also asked bidders to submit their most recent audited balance sheet, a banker’s certificate of immediately available liquid funds, or a trustee’s certificate of committed and undrawn capital. It says that in each case, documents should be accompanied by a certificate or a resolution by the bidder that such funds are unencumbered and have not been previously earmarked or allocated to any other investment.
The company proposes to send a so-called request for proposal to all registered bidders who meet the norms and ask them to submit a detailed EoI by 20 March. The company has decided to appoint either a former Chief Justice of India or a former Supreme Court judge to oversee the entire process of selecting a winning bidder.
After completing the so-called due diligence process, or examination of the company’s assets and liabilities, bidders will have to execute pre-financial bid documents, based on which the company will shortlist them. They will then be asked to submit financial bids and execute a copy of the share subscription agreement.
After evaluating the bids, the company will select a successful bidder. The “successful bidder will have four days’ time to deposit the entire subscription amount with the company and also deposit funds required for open offer in an escrow account”, the company statement said.
Satyam started the sale process as a city court on Monday allowed the Central Bureau of Investigation to take Raju, his brother and former managing director B. Rama Raju and former chief financial officer Srinivas Vadlamani and two auditors of Price Waterhouse, S. Gopalakrishnan and Srinivas Talluri, into custody till 17 March for questioning. The court also dismissed the bail petitions of the Price Waterhouse auditors.
International Business Machines Corp. (IBM) may be the front- runner to acquire the Indian company, the Business Standard newspaper had reported on 5 March, citing unidentified people familiar with the situation. Karen Davis, a Shanghai-based IBM spokeswoman, declined to comment on the report.
Four companies have publicly declared their interest in acquiring Satyam so far. They include engineering and construction firm Larsen and Toubro Ltd (L&T), which already owns 12% of Satyam; Tech Mahindra Ltd, a unit of the Mahindra Group; Hinduja Group’s HTMT Global Solutions Ltd; and B.K. Modi’s Spice group.
An L&T spokesperson said: “The company will submit its EoI before the deadline, but will take a call on a financial bid based on the outcome of due diligence from the material that the company will offer to bidders.”
Prabal Banerjee, chief financial officer of the Hinduja Group, said HTMT will register an EoI for Satyam, but “a final call will be taken on filing financial bids only after a thorough due diligence”.
Tech Mahindra’s director of marketing Prasenjit Ghosh Roy, however, said the company is yet to decide on even registering an EoI. “We should be taking a call on it by (end of) today,” he said.
Modi said Spice group would bid, adding that the group has sufficient money in banks. He demanded that Satyam place on its website all the information it will make available to the bidders.
“Why should only the bidders be privy to the information that the company is providing, such as businesses, financial and legal diligence material, depriving the retail shareholders? The company should adopt a more transparent process even in disclosures, which will help public shareholders of Satyam to take an informed decision,” Modi added.