Satyam likely to get new owner in 2 months

30 Jan 2009


HYDERABAD: The management of Satyam Computer Services, fighting to boost morale in the beleaguered company, has told its employees that the sale of the company will be completed in about two months. This is the first time the company has given an indication of the time needed to complete the process.

“We have been informing our employees through webinars that investment bankers are evaluating strategic options, which include possibilities of a change in management control. We need to keep them informed as we are aware that employees will wait and watch to see how events unfold and keep their options open. The process of change in management control, if any, will take at least 60 days from now,” said a source privy to the development.

A person close to the company’s new government-appointed board also confirmed that its main task would be to find a new strategic investor to run the troubled software company. “This board has been put in place as a temporary measure to stabilise the company. A strategic investor has to be found soon, possibly within a two-month timeframe,” the person said.


All suitors, including L&T, will have to take part in the bidding process which will be overseen by the new board, he added.

The move was taken in order to quell rumours and gossip and settle uncertainty amongst employees. Morale plummeted in this once-proud software major after its founder B Ramalinga Raju confessed to falsifying accounts for several years on January 7. Its share price plunged, customers threatened to walk out and the government took the unprecedented step of superseding its board and appointing a new one.

A number of suitors have expressed interest in acquiring Satyam. The most aggressive among them has been Larsen & Toubro (L&T), which has already acquired 12% in the company. L&T has also been heavily lobbying with institutions, lenders, the government and the newly-appointed Satyam board that it be allowed a chance.

The board, in its meeting last week, said that it will follow a proper and transparent process and appointed Goldman Sachs and Avendus Advisors to manage it.

Meanwhile, institutional investors on the board of L&T are likely to press the management about its plans for Satyam. The engineering major has already pumped in Rs 700 crore to get around 12% of Satyam.

On Thursday, there was a strong buzz that some of the intermediaries had picked up a little less than 2% in Satyam (which would take L&T’s holding in Satyam to over 14%), but there was no confirmation on this. The L&T board is meeting on Friday in Mumbai.

While L&T’s average cost per Satyam share is pegged at around Rs 80, the company is sitting on mark-to-market losses of around Rs 250 crore. “After making such large investments in Satyam, it’s important for L&T that it gets control of the IT company. L&T already has the first-mover advantage and has made its intent clear by picking up the stake. Our main concern now is that L&T should protect its investments and the only way to do it is to ensure that it gets control of Satyam,” said a senior official with a leading financial institution.