Feb. 19 (Bloomberg) -- Satyam Computer Services Ltd., the Indian software-services provider at the center of the nation’s largest corporate fraud inquiry, can sell a stake to a strategic investor via an open bidding process, the Company Law Board said.
Satyam can make a preferential allotment of shares to the buyer, the law panel said today in a ruling on an application from the Hyderabad-based company. The software provider has also been allowed to increase its authorized share capital to 2.8 billion rupees, from 1.6 billion rupees, by issuing 600 million shares of 2 rupees face value each.
Satyam’s government-appointed board has received bids from several suitors including Larsen & Toubro Ltd. and on Jan. 27 named Goldman Sachs Group Inc. and Avendus Capital Ltd. to help it identify strategic investors. The software provider’s shares have tumbled 74 percent since its founder and former chairman Ramalinga Raju said Jan. 7 he had falsified earnings and inflated assets by $1 billion.
“An auction may help Satyam maximize its value,” Harit Shah, an analyst at Mumbai-based Angel Broking Ltd., said by telephone. “What needs to be seen is the long-term game plan of the new strategic investor.” Shah does not have an investment rating on the stock.
Satyam told the corporate law authority it would like to sell a minimum 26 percent stake as no strategic investor would be interested in acquiring less, the board’s chairman S. Balasubramanian observed in his order.
‘Strategic Investor Necessary’
“Further induction of long-term funds through induction of a strategic investor is necessary” for the company’s survival, he said.
Satyam’s state-appointed chairman Kiran Karnik and chief executive officer A. S. Murty have tried to keep customers from joining State Farm Mutual Automobile Insurance Co., the largest home and auto insurer in the U.S., in canceling their contracts. The two leaders, whose appointment earlier this month ended a four-week leadership vacuum following Raju’s arrest and the sacking of the company’s interim board on Jan. 9, have also had their task cut out in ensuring adequate funds to run the business.
Y. M. Deosthalee, chief financial officer of Mumbai-based Larsen declined to comment on the law panel’s ruling today. India’s largest engineering company, which tripled its stake in Satyam to 12 percent last month, will await decisions from India’s capital markets regulator and the provider’s board before deciding its next step, Deosthalee said on Feb. 5.
Satyam shares fell 4.8 percent prior to the announcement to close at 46.2 rupees in Mumbai trading, the most since Feb. 5. The benchmark Sensitive Index rose 0.3 percent.
“The board will decide the modalities” of the stake sale, which would be done through an open and transparent process, Company Affairs Minister Prem Chand Gupta told reporters today.
Satyam’s board of directors is due to meet next on Feb. 21.
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1 comment:
Things are now moving fast and its good news for Satyam. The new investor will bring in the much needed capital in the company to take care of its short and medium term needs. This augurs well for the company which just over a month ago was being written off. Goes to show that it’s still has a lot to offer to its clients and its employees.
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