Satyam kicks off auction for 51% stake [FT]
By Joe Leahy in Mumbai
Published: March 9 2009 17:20 | Last updated: March 9 2009 17:20
India’s Satyam Computer Services has launched an auction for a 51 per cent stake in the scandal-hit company.
The sale will test international appetite for India’s outsourcing industry
The country’s fourth-largest information technology services company invited prospective bidders to register their interest by Thursday, and set conditions, including proof that they would have access to minimum funds of $290m.
“There are a whole slew of companies in Europe that missed out on the offshore paradigm and have been in furious catch-up mode,” said Partha Iyengar, India head of research at Gartner.
“For them, Satyam could be a leg-up if they are able to handle the not-insignificant challenge of integration.”
Satyam would once have been considered a desirable acquisition for foreign strategic investors because of its leading position in one of India’s fastest-growing and most internationally important industries.
But the company’s true worth is unclear after its former chairman, B. Ramalinga Raju, confessed in January to fixing the accounts, including inventing a cash balance of $1bn in what is considered India’s biggest corporate scam.
Satyam’s new government-appointed board has yet to reveal the true financial condition of the company, saying it will take weeks for the group’s new auditors, KPMG and Deloitte, to complete a restatement of its accounts.
Satyam said on Monday that it would issue new equity of 31 per cent to the selected bidder.
Under Indian regulations, the acquirer would then be obliged to make an open offer to the public for a further 20 per cent of the enlarged company.
In spite of the uncertainty over the company, which is also facing investor lawsuits in the US, a number of prospective suitors have expressed interest.
The suitors include Indian engineering and construction firm Larsen & Toubro, which is already Satyam’s largest single shareholder with a 12 per cent stake, India’s Spice and Hinduja groups and software firms HCL Technologies and Tech Mahindra.
Few foreign companies have yet openly shown an interest. But analysts believe Satyam might be a good fit for large European IT consultancies that have yet to build a convincing outsourcing presence in India.
Satyam’s new board of directors has said in the past that it is looking at a valuation of $1bn for the IT firm.
SP Tulsian, an independent equity analyst in Mumbai, pointed to Satyam’s reported sales of $2.1bn in the year ended March 31, 2008. Allowing for a heavy discount to account for the scam, a valuation of $1bn could be reasonable. |
