Hindujas opt out of Satyam race

Hindujas opt out of Satyam race

Hyderabad: India’s largest engineering firm Larsen and Toubro Ltd (L&T), Mahindra Group’s Tech Mahindra Ltd and B.K. Modi’s Spice group said they remain in the race to buy a majority stake in Satyam Computer Servcies Ltd, as the first stage of the sale process ended on Thursday.

But the Hinduja Group, which had shown interest in acquiring the fraud-hit firm, “decided not to go ahead with the bid process", chief financial officer Prabal Banerjee said. “Being a responsible corporate player, we would not want to make any further comments, especially as the bidding process is ongoing."

The deadline for potential bidders to submit initial expressions of interest (EoIs) for buying a 51% stake in Satyam Computer passed at 5pm on Thursday. The company initially proposes to offer a 31% stake through a sale of new shares to a strategic investor, who would then make a mandatory open offer to minority shareholders to buy 20% more at the same price.

If the buyer fails to acquire 51% after the open offer, the suitor will have the right to acquire more new shares to make up the shortfall. The controlling investor won’t be allowed to sell its stake in Satyam for three years.

Asked about the number of potential bidders who had registered their EoIs, Satyam chairman Kiran Karnik said, “We can’t give out the numbers yet, but I expect the known names from among Indian players, besides one or two foreign players."

The number of registrants at this stage does not mean much because an EoI does not involve any cost to the companies, he added.

Also on Thursday, the Delhi high court rejected a public interest litigation that challenged the sale process on grounds that it didn’t have the approval of existing shareholders. The petitioner, Manohar Lal Sharma, claimed he was a Satyam shareholder.

Additional solicitor general Gopal Subramanium, who appeared on behalf of the Union government, argued that such a petition could derail the entire process of salvaging Satyam.

Such litigation “would hamper the growth of the company, demoralize the employees" and block regulators from taking measures that are for “the benefit of all stakeholders", Subramanium said.

Satyam shares dropped 3.2% to Rs47.20 on the Bombay Stock Exchange (BSE) on Thursday, valuing the controlling stake at about Rs1,620 crore. The benchmark BSE Sensex advanced 2.3%.

The sale is crucial for Hyderabad-based Satyam, which has been at the centre of India’s biggest corporate fraud investigation after founder B. Ramalinga Raju on 7 January confessed to having doctored the company’s books to the tune of Rs7,136 crore over several years. The firm is seeking a cash infusion to pay operational costs, win new orders, and restore the shaken confidence of clients and investors.

Bidders need investable funds of at least Rs1,500 crore under the criteria specified by Satyam. The company proposes to next send a so-called request for proposal to all registered bidders, who meet its norms, to submit a detailed EoI by 20 March.

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 a shortlist will be prepared.

They will then be asked to submit financial bids and execute a share subscription agreement. That will lead to the selection of the winning bidder.

Satyam’s government-appointed board has promised to give access to bidders to the company’s businesses, and financial and legal records to enable them to arrive at a valuation.

An L&T spokesperson said the company, which has a 12% stake in Satyam, will decide whether to proceed further with the bid after studying such information.

Tech Mahindra said in a statement: “Once we have received the request for proposal and other information, we will evaluate and conclude on next steps."

Spice group also confirmed that the group had registered its intent to bid. A group company, Spice Innovative Technologies Ltd, will bid for the Satyam stake, Preethi Malhotra, a director on the board of the company, said.

Satyam’s board will meet on Friday in Hyderabad to take stock of the situation after the end of Thursday’s deadline.

Sangeeta Singh in New Delhi and Bloomberg contributed to this story.