Satyam sets no floor price for bids

Satyam Computer Services (SATYAM.BO : 90.55 -2.2) has announced the bidding modalities for acquiring a majority stake in the company, on a day when CBI got custody of its former chairman and suspected partners in the 7,800-crore fraud.

Many interested parties are gearing up to take part in the 'transparent' bidding process after the Satyam management issued an expression of interest (EoI) on Monday. The earlier issue of knowing the financial position of Satyam has also been taken care of.

The EoI, issued after getting permission from the Securities and Exchange Board of India, sets no floor price for the bidders, though they will have to furnish proof of fund availability of at least Rs 1,500 crore.

The bidders will have to register with the company by March 12 and submit detailed EoIs by March 20. Based on these EoIs, eligible bidders will be short-listed and then given access to certain business, financial and legal diligence material of the company once they sign a non-disclosure and non-solicitation agreement. This was a factor that many prospective bidders were concerned about. With this being addressed, the confidence of the bidders has increased.

LandT said it would submit its EoI to Satyam. "Depending on the quality and quantity of information available to us we would further take a call on the actual bid," YM Deosthale, chief financial officer, LandT, said.

Spice group chairman BK Modi said his company has enough funds to make a bid for Satyam and would be going ahead. "It is a good thing that the bidding is taking place through the Internet and there is no minimum floor price, which should encourage many players to participate in the process. Transparency is the key," Modi added.

Tech Mahindra (TECHM.NS : 916.55 +7.3) said that it is in a process to decide if the firm wants to bid or not.

The Hinduja group also said that it was looking at bidding for the company but was yet to take a decision. Group CFO Prabal Banerjee told FE,"I think, it is an absolutely fair and transparent process and the board should be commended for this. The only issue is that there is no clarity as to what kind of information will be available how adequate will it be and if the information will be sufficient to take a call on the valuation and liabilities of the company both on and off the balance sheet. Also legal claims, which can run in millions of dollars, and any legacy issues that may show up as impediments need to be checked."

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With this, the registration of interest commenced on Monday and the process for selecting a bidder shall be overseen by a former Chief Justice of India or a former Supreme Court judge appointed by the company.

The selected investor will have to deposit the entire subscription amount with the company and the requisite funds for the public offer in the escrow account, as required under the Sebi takeover regulations. The investor will then be required to make a mandatory public offer to purchase a minimum of 20% of the company's enhanced share capital. The public offer will be made at the same share price paid by the investor for the initial subscription.

Knowing this, shares of Satyam jumped as much as 16%, taking the market capitalisation of the company to about $630 million. Last year, the market capitalisation would have been around $7 billion. Shares of the company finally closed at Rs 48.75 on Monday.

As the Satyam fortunes looked up for its investors and employees, its discredited former top executives faced the prospects of a week-long stay in CBI custody. The XIV additional chief metropolitan magistrate court on Monday sent former chairman B Ramalinga Raju, his brother and former MD Rama Raju, former CFO Vadlamani Srinivas and audit house Price Waterhouse partners S Gopalakrishnan and Talluri Srinivas to CBI custody from March 10 to March 17.

The five will be interrogated for their involvement in the Rs 7,000-crore accounting fraud at Satyam either at the CBI office in Hyderabad or at the Dilkusha Guest House in the city, where the CBI is accommodated temporarily.

The CBI would interrogate the accused all the days from 10 am to 5 pm in the presence of their counsel. After the interrogations, they would be produced before the court on March 17.

CBI, it may be recalled, took up the Satyam case on February 20 and filed a petition on March 3, seeking seven days custody of all the five people for further interrogation. The local court, after hearing the arguments of the CBI counsel and defence lawyers on Friday, had reserved orders for Monday.

The local court on Monday also dismissed the bail petitions of Gopalakrishnan and Srinivas of PwC and posted the bail petition of former CFO V Srinivas for March 18.