Bangalore: The new board of fraud-scarred Satyam Computer Services met on Thursday to discuss options to revive the company as a potential bidder said it would not increase its stake in the firm for now and a customer suspended new work contracts.
The government-appointed board was expected to discuss appointing new executives, options for fresh funding and the possible sale of the firm at a two-day meeting as it battles to restore confidence of its more than 600 clients in the wake of India’s biggest corporate scandal.
Satyam will issue a statement after the meeting ends on Thursday in the southern city of Hyderabad.
Highlighting the pressures on the company, National Australia Bank, Australia’s largest lender, said it would suspend new outsourcing contracts awarded to Satyam, which provides software and back-office outsourcing services.
Also Read The Satyam Fiasco (Full Coverage)
Separately, engineering major Larsen & Toubro, seen as a front-runner for buying Satyam as it is the firm’s biggest shareholder, said it had not raised its stake further and would wait for decisions by the market regulator and Satyam’s board.
“We have not decided on anything. All will be determined by what Sebi and the board decide,” chief financial officer YM Deosthalee told reporters, referring to the Securities and Exchange Board of India.
Last month, L&T trebled its holding in the outsourcer to 12%. Under Indian law, increasing a stake to 15% triggers an automatic offer for another 20% at a price not less than the average of the previous six months.
Satyam shares have plunged since mid-December, first on a planned deal to buy related firms and then after founder Ramalinga Raju disclosed in January that profits had been overstated for years.
Sebi said on Monday it would change its rules on mandatory open offers, but gave no other details
Satyam shares fell 7.7% in Mumbai on Thursday, compared with a 1.2% drop in the broader market.
The Times of India, in an unsourced report, said some of Satyam’s six board members had objected to L&T as a potential suitor because a senior official of state-run Life Insurance Corp (LIC) was on the outsourcer’s new board.
LIC is the biggest shareholder in L&T, and also has a stake in Satyam. Some board members thought a deal with L&T could be tantamount to a related party transaction, the paper said without saying how it obtained the information.
Apart from L&T, India’s Spice Group, US-based outsourcer iGate Corp and the diversified Hinduja Group have also expressed their interest in acquire a controlling stake in Satyam, attracted by its client base.
NAB said Satyam, whose other clients include General Electric, Telstra Corp and Cisco , continued to meet existing service level commitments and contractual obligations towards the bank.
“It has been decided that application development and maintenance work transitioned to Satyam in 2007 and 2008 will remain unchanged,” a bank spokeswoman said in an e-mailed statement to Reuters.
“However, until the longer-term future of Satyam becomes clearer, NAB will suspend all work currently in the early stages of transition to Satyam,” she said.
Last month, Satyam said US-based State Farm Automobile Insurance had terminated its outsourcing contract.
Satyam has been struggling with near-term funding in the wake of the scandal as auditors try to determine the true shape of its books. A wave of contract cancellations could threaten its survival.
The paper also reported on Thursday that a team from the US Securities and Exchange Commission (SEC) was in India to meet the new board of Satyam after having already met officials of market regulator in relation to the fraud.
Satyam shares are also listed in the United States, where a number of lawsuits have been filed against the firm following the scandal.