Satyam prompts takeover rule move

India plans to ease takeover rules for “abnormal cases” in a move that could ease the sale of Satyam Computer Services, which has been snared in India’s biggest corporate scandal.

The Securities and Exchange Board of India (Sebi) said on Monday it would set new guidelines and amend existing rules which force an investor who has acquired 15 per cent of a company to make an open offer for an extra 20 per cent at a six-month average share price.
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The relaxation of the rules would make Satyam more attractive to an acquirer.

The average share price of the IT outsourcing group has been about Rs40 ($0.82) since its then-chairman B. Ramalinga Raju confessed last month to manipulating the group’s books. This compares with the Rs255 level which would be the average price under the current takeover rules.

Larsen & Toubro, the Indian engineering group, has become the front runner to take over the company. It recently trebled its stake in Satyam to 12 per cent.

“Sebi has moved in the right direction, but we will have to see at what price it sets the open offer…L&T thinks something between Rs50 and Rs40 would be fair. At that point it would make a move on Satyam,” said a person close to the engineering company.

C.B. Bhave, Sebi’s chairman said: “We will amend our regulations through guidelines to enable a transparent process for arriving at a price in case of such acquisitions.”

Under the new rules, the period over which the price is calculated is likely to be shorter, to give a company that has been hit by a scandal a fairer price, said analysts.

Sebi’s proposed amendments followed a request from Satyam’s government-appointed board to ease the open offer pricing rules.

“If Sebi decided not to introduce some changes to the takeover rules then nobody would make an offer for the company, it would be simply over priced,” said Vinay Agrawal, executive director at Angel Broking.

Satyam’s overall market value has dropped to about $800m from $7bn in May last year.

Other companies that have shown interest in Satyam are Spice Group, the Indian conglomerate headed by BK Modi, Hinduja Global Solutions, the IT arm of the Hinduja conglomerate, and iGate, the US-based outsourcer.

Satyam shares closed up 6.6 per cent on Monday at Rs57.60 on the Bombay Stock Exchange.