New Delhi: Satyam Computer Services won approval on Thursday to bring on board a strategic investor with the financial and management clout needed to ensure the survival of the fraud-hit outsourcer.
The Company Law Board (CLB) said Satyam could raise its authorised shares on issue to 1.4 billion from 800 million, and a board member said criteria for a stake sale could be finalised next week.
Satyam's annual report for the year ended March 2008 shows it had 670.5 million shares on issue out of its authorised limit of 800 million shares. If it were to increase its share capital to the new authorised limit of 1.4 billion shares, an investor could potentially own more than half the company, based on the 2007/08 numbers.
Satyam has been struggling for survival since January 7, when founder and chairman Ramalinga Raju quit and said profits had been overstated for years and assets falsified. Raju is in jail.
"The (Satyam) board of directors is of the firm view that without induction of a strategic investor/s with sufficient financial resources and managerial capability, the company cannot survive in the long term," the CLB said, quoting Satyam's lawyer.
The CLB said the company's lawyer had said an investor would require a stake of at least 26 percent of the enhanced capital on a preferential basis.
An investor must be selected through a competitive auction, but Satyam could issue preferential shares at par or a premium, the CLB said. Earlier, Deepak Parekh, one of Satyam's government-appointed board members, said details of the sale could be outlined next week.
"We will put some minimum financial amount, we will put some minimum equity holding ... these are all open issues which are going to be finalised," Parekh told NDTV Profit television in excerpts of an interview shown on Thursday.
The board had last month appointed Goldman Sachs and Indian firm Avendus to find strategic investors for the firm.
PAGE_BREAK
Potential suitors that have declared an interest include engineering and construction firm Larsen & Toubro, Spice Group and Hinduja Group. "Earlier the better," said Spice Group chairman B.K. Modi. "They should finish all the processes. I hope in the first week of March they go for it," he told NDTV Profit, adding he expected bids could go up to Rs 60 a share. Satyam shares closed at Rs 46.25 on Thursday, less than one-tenth of their 2008 high of 544 rupees.
Guesstimates
With Satyam's accounts still to be restated, prospective bidders would have to make "guesstimates" when bidding, Parekh said, but added that should not be too big a problem. "They are in a business that other IT companies are in. Margins are more or less the same across industries," he said.
Satyam's assets were unpledged and the company also had huge receivables for work done in the last quarter, he said. "We are realising each and every dollar that is being billed. And this is one of the important tasks that the board is looking at every week. Every week, twice a week, we look at receivables," Parekh said.
"I think normalcy has come back to Satyam."
Separately, Satyam's new CEO has told staff that all capital expenditure except for customer deliveries has been suspended and other costs cut such as travel and training.
"The global economic condition and outlook remain dismal even as we begin our own financial recovery," A S Murty wrote in emailed statement to staff. "We must control costs and conserve cash," he said, adding most sales and support staff will be located in low-cost countries.
Murty, appointed as CEO earlier this month, said Satyam was winning orders from new customers, but did not elaborate.
Comments
0 comment