Hyderabad: Satyam Computer Services Ltd invited so-called requests for proposals from investors who expressed their interest in buying a stake in the company, taking the saga of the fraud-hit software company a step closer to its denouement, even as speculation continued on the number of interested parties and their identity.
Tech Mahindra Ltd, Larsen and Toubro Ltd, Spice group and iGATE Corp. have confirmed their interest in Satyam. CNBC-TV18, citing a news report by NewsWire 18, said that 60 companies, including private equity (PE) firms Kohlberg Kravis Roberts and Co. and Fidelity PE had met the Thursday deadline for expressing interest in the software company.
Rebuilding process: A file photo of Satyam Computer Services’ office in Hyderabad. The Satyam board, which met on Friday, said it ‘has received adequate response from Indian and international bidders’. Noah Seelam / AFP
The company, however, looked to be playing hardball with the potential bidders by asking them to formally respond to the request for proposals by 20 March, along with proof that their net worth was at least Rs1,500 crore—one of the eligibility criteria for the bidders. Satyam said that once this was done, interested bidders will be provided “data and information regarding the company to enable them to submit technical and financial bids”.
That may not go down well with the bidders, some of whom are already asking for more information.
“iGATE is now expecting to receive from Satyam Computer Services the latest financial statements, including those for the quarter ended December 2008 and the months of January and February 2009, and updated position on liabilities and potential liabilities of the company,” a statement released by the company in California, US, where it is headquartered, said. “In the event of iGATE not receiving this information immediately, it has no option, but to withdraw its expression of interest.”
The Hinduja Group pulled out of the race before the 12 March deadline.
Meanwhile, Satyam’s recently appointed chief executive officer A.S. Murty is set to visit the US early next week, in a bid to assuage clients worried about business continuity. Around 62% of the company’s revenue comes from the US.
Satyam’s woes started on 7 January when its founder B. Ramalinga Raju disclosed that he had, over the years, fudged the company’s books to the tune of Rs7,136 crore.
The government responded by asking several regulatory agencies to investigate Satyam and dissolved the company’s board, appointing in its place a new one, headed by Kiran Karnik, the former head of India’s software lobby group Nasscom.
The new board decided to sell a 31% stake in the company through the issue of new shares, with the winning bidder acquiring 20% shares from the market.
The board retained the option of issuing another 20% of new shares if the winning bidder was unable to buy shares from the market.
Satyam’s accounts are being restated by audit firms KPMG and Deloitte Touche Tohmatsu, but there’s no clarity on when this process will be completed. There’s also no fix on the exact quantum of damages likely from the several class action suits filed against the company in US courts—Satyam is listed on the New York Stock Exchange—although some estimates put this at a maximum of $500 million (Rs2,585 crore).
The Satyam board met on Friday and said that it “has received adequate response from Indian and international bidders, including private equity firms”. It did not disclose how many bidders had responded nor did it identify them. It added that it would invite requests for proposals from all registered bidders on Friday itself.
Murty, who just returned from his visit to Singapore and Australia, briefed the company’s government-appointed board about his meetings with various clients from the Asia-Pacific market.
Reassuring: Satyam chief executive A.S. Murty. He is set to visit the US soon, in a bid to assuage clients worried about business continuity.
So far the company has lost one client, US-based State Farm Insurance Co., while others, including storage device maker Sandisk Corp., have expressed reservations about continuing their association with Satyam.
In a move that could raise the apprehensions of potential bidders, British mobile payment technology services provider Upaid Systems Ltd said on Friday that it will hold Satyam’s acquirer responsible for payment of damages in the event of a favourable judgement in its pending case against the Indian firm.
Upaid has a pending fraud and forgery lawsuit against Satyam in a Texas court. The case, filed in April 2007, pertains to transfer of intellectual property rights arising from a project the companies jointly worked on in the late 1990s. The case has a trial date set for 1 June.
“The legal proceedings will go ahead as planned and if there is a favourable judgement, whoever is in control of the company at that time will be responsible for paying the damages,” said Joanne Hunter, senior vice-president (communications) at Upaid.
The British firm claims that it has suffered damages to the tune of nearly $1 billion on account of the wrongdoings of Satyam.