Bangalore: IGate Corp. has teamed up with a private equity (PE) firm to gain funding and legal expertise to bid for Satyam Computer Services Ltd, the software-services provider at the center of India’s biggest corporate fraud.
Joint effort: IGate’s Phaneesh Murthy says the firm does not have enough resources and the expertise to bid for Satyam on its own. Hemant Mishra / Mint
“We don’t have the resources to do this on our own,” chief executive officer Phaneesh Murthy said over the phone from Bangalore, where the Fremont, California-based company has its Indian operations. “Second, we need a private equity partner who has done this kind of thing before, in terms of lawsuits and all that.”
IGate had said on 12 March it had registered to bid for the firm after Satyam’s state-appointed board pushed ahead with a plan to sell a 51% stake. Buyers may struggle to value the Hyderabad-based company as it is restating accounts, faces lawsuits from US investors and has lost $1.7 billion (Rs8,772 crore) in value since founder B. Ramalinga Raju said on 7 January he’d inflated at least $1 billion in assets.
IGate, which expressed its interest in Satyam in January, decided to go ahead last week after receiving an assurance that the Indian software provider would share some financial information, Murthy said.
“Because the transaction was taking too long and we got the information that no new financials will be provided to any bidders before the auction, we said it doesn’t make sense, we can’t do this,” Murthy said. “Four days ago, in fact almost the last day of the closing, I was given the information that ‘now we are going to provide new financials’ and that is why we have expressed our interest again.”
IGate, which provides outsourced technology services to General Electric Co., will compete with Larsen and Toubro Ltd, India’s largest engineering firm, Tech Mahindra Ltd, Satyam’s smaller rival, and Spice Corp., that has businesses in entertainment and communication technologies.
Meanwhile, mutual fund company Fidelity Investments denied media reports it’s interested in acquiring control of Satyam. “Fidelity categorically denies having bid for Satyam,” Anjali Patil, a Mumbai-based spokeswoman for Fidelity International, said in an email. Fidelity owned 10.17% of Satyam, according to a regulatory filing on 2 March. Satyam fell 0.6% to close at Rs45.25 in Mumbai trading on a day when the benchmark index, Sensex, climbed 2.1%.