Satyam shares surge as bidders evince interest

Satyam shares surge as bidders evince interest
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First Published: Thu, Jan 29 2009. 12 40 AM IST
Updated: Thu, Jan 29 2009. 12 40 AM IST
New Delhi: Shares of Satyam Computer Services Ltd rallied as much as 18% on Wednesday, extending gains to an eighth session, as investors bet on a possible sale of the fraud-hit outsourcing firm after its new board said there had been wide bidding interest for the company.
Meanwhile, Samuel DiPiazza, chief executive officer of auditing firm PricewaterhouseCoopers Llp., reached India to assess the situation arising from the fraud investigation into Satyam in which two partners at its Indian unit have been arrested.
Former Tata Chemicals Ltd managing director Homi Khusrokhan has emerged as the front-runner to become the next chief executive officer (CEO) of Satyam, the business news channel CNBC-TV18 reported, citing people it didn’t name. Khusrokhan said he had agreed to join the Satyam board, but wouldn’t be taking the CEO’s post, Bloomberg reported.
Satyam, India’s No. 4 software exporter, plunged into a crisis after its founder B. Ramalinga Raju resigned as chairman on 7 January, revealing that the firm’s books had been falsified for years by as much as Rs7,136 crore. The government stepped in to limit the damage from India’s biggest corporate fraud and appointed a new six-member board. On Tuesday, it appointed Goldman Sachs and Avendus, an Indian investment bank, to identify strategic investors and obtain expressions of interest.
Boston Consulting Group, or BCG, appointed as management adviser in Satyam’s revival process, sees Satyam as a quality company with a viable business, one of its India directors told Reuters on Wednesday.
“Just because a few people did some fraud and created an issue on the balance sheet does not mean that this company is not a very high-quality company,” said James Abraham, a director and partner at BCG’s Indian unit.
Engineering conglomerate Larsen and Toubro Ltd, or L&T, which also runs a small software firm, has trebled its stake in Satyam to 12% and its chairman said on Tuesday it would not be averse to raising it further to 15%. Under Indian law, this would trigger an open offer for a further 20%.
“The market is expecting some kind of an open offer,” said Gajendra Nagpal, Unicon Financial CEO. “And some confidence has been restored with hopes that shares are going to a credible hand like L&T.” The open offer is usually based on the average price over the last six months or some Rs335, according to Thomson Reuters data, but Nagpal said there was a possibility the market regulator could relax rules as Satyam shares had plunged.
“We are hoping that it won’t be less than Rs90. So it’s a punter’s call to make some quick money,” Nagpal said.
Satyam Computer shares rose 17.6% to Rs55.45 on a heavy volume of 82 million shares—25.5% of the total.
Fund house Fidelity International Ltd, through its two subsidiaries, bought a 2.69% stake in Satyam from the open market on Wednesday: 17.1 million shares for Rs91.34 crore at an average Rs53.42 from the National Stock Exchange.
T.N. Manoharan, a member of Satyam’s new board, said on Tuesday it had received several proposals from companies as well as buyout firms and would devise “appropriate, fair and transparent measures” to enable open bids.
The PricewaterhouseCoopers CEO is in India to discuss the Satyam situation in detail and to offer support to the Indian unit, Price Waterhouse.
His visit coincides with the resignation of Thomas Mathew, head of the auditing practice of the local unit, and the suspension of the two partners who audited the accounts of Satyam.
In another development, Union minister of corporate affairs Prem Chand Gupta said on TV that Satyam founder Raju had created a complex web of companies to siphon off funds. “Our information is that there was a network of almost 300 companies and funds were diverted from one company to (another) and then to (a) third,” he told Karan Thapar on the CNN-IBN channel.
Also on Wednesday, a Hyderabad court denied bail for Raju, his brother and former Satyam managing director B. Rama Raju and former chief financial officer Srinivas Vadlamani.
PTI, Bloomberg and Mint’s Lison Joseph in Hyderabad contributed to this story.
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First Published: Thu, Jan 29 2009. 12 40 AM IST