Fraud-hit Indian outsourcing giant Satyam Computer Services said on Monday it had started the bidding process to sell off a 51 percent stake. Each interested bidder will have to show proof of availability of at least 15 billion rupees (288 million dollars) in funds and submit a detailed "expression of interest" to acquire the stake, a company statement said.
Satyam has been battling for survival since January when its founder B. Ramalinga Raju, now in jail, stunned the corporate world by declaring he inflated the firm's balance sheet by more than one billion dollars and fudged its profits for years. Satyam shares rose 15.8 percent or 6.65 rupees to 48.75 rupees on Monday. Last Friday, market regulator the Securities and Exchange Board of India gave the go-ahead for the stake sale to proceed in two phases.
The buyer would first acquire newly issued shares of the company representing 31 percent of its share capital. The purchaser will then have to make an open public offer, mandatory under financial market regulations, to acquire another 20 percent. India's engineering multinational Larsen and Toubro, telecom firm Spice Corp, Mahindra's software services firm Tech-Mahindra and IBM, the world's largest computer services provider, are seen as interested bidders, media reports say. IBM has declined comment.
"We will make an expression of interest (to bid for Satyam), it opens the door to look at qualitative details of the firm," a spokesman for Larsen and Toubro told AFP. Larsen and Toubro currently holds a 12 percent stake in Satyam, according to latest shareholding data at the Mumbai stock exchange.
"Based on the submitted EOI (expression of interest), eligible bidders will be short-listed and given access to certain business, financial and legal diligence material relating to the company," Satyam said in a statement to the Mumbai stock exchange. Bids have to be submitted by 5:00 pm Thursday (1130 GMT).
Once the bidder is selected, it will have to submit the subscription amount and funds for open offer, in an escrow account, within four days. Fund managers are however skeptical about the bidding process, in the absence of accurate valuations for the fraud-hit firm.
"There is no clarity on Satyam's valuations. On what basis can a bidder determine the true value for the firm?" said Hitesh Agrawal, head of research at Angel Broking. "A pro forma balance sheet would help throw some light," he said. Satyam's auditors have said that it could take up to six months for clarity to emerge on Satyam's financials. "Restatement of the accounts may take time" and will not be done in time for the bidding process, Satyam's chairman Kiran Karnik told AFP last month.
The buyer will also have to consider potential liabilities from lawsuits filed in the US courts by defrauded shareholders. The bidding process will be overseen by a former chief justice of India or a former Supreme Court judge, appointed by the company. The sale is going ahead even though it could be months before the full truth about the disgraced outsourcing giant's finances emerge.