Government wants to sell 51 per cent in Satyam
21 Feb 2009
The six-member Satyam Computer Services board appointed by the government will meet today to authorise enhancing the scam-hit company's authorised capital through a preferential allotment of equity shares. It will also finalise a criterion for selecting prospective bidders for the company. The selection process could take up to 45 days after the approval is sought.
The board will then submit the plan to the Company Law Board and to the Securities and Exchange Board of India. The market regulator is expected to ease the pricing norms for the preferential offer, though it is yet to be decided whether the preferential allotment will be at par or at a premium. Satyam's investment bankers, Avendus and Goldman Sachs, are to make a presentation to the board on the strategic investors in the firm.
The government is in favour of selling a 51 per cent stake in the company so that it can raise sufficient funds to meet its working capital expenses and liabilities from various class-action suits. This means that a successful bidder would have to pay Rs 4,000-5,000 crore for the 51 per cent stake. An additional 20 per cent shareholding could be acquired through an open offer.
The actions follow the Company Law Board approval for Satyam to sell equity to a strategic investor. In its order, the CLB said the strategic investor should be selected through an open bidding process that will be overseen by a retired high court chief or a Supreme Court judge.
If the board decides to invite bids for a 51 per cent stake, Satyam will have to issue around 697 million shares of Rs 2 each to expand the capital base from the current base of 670 million shares. At the average market price of around Rs 50, the deal would fetch around Rs 3,500 crore.
The strategic investors include Larsen and Toubro (which now has a 12 per cent stake in Satyam and has invested around Rs 670 crore in the company so far), Tech Mahindra, Aegis BPO (which is only interested in the BPO business), and the iGate-PE combine. L&T has expressed firm interest to the government in acquiring management control of Satyam.
Investor relief ruled out
Meanwhile, the government on Friday ruled out compensation for investors or companies hit by the Satyam financial fraud, estimated to be of the order of Rs 7,800 crore. "The government has no plan to provide financial assistance to the investors or the companies involved," minister of corporate affairs Prem Chand Gupta told the Lok Sabha.
The minister said the losses suffered by investors after Satyam's top management admitted to fudging books of accounts "are not quantifiable, as capital market fluctuations are caused by a variety of factors".
