Satyam rules out change in bid process

28 Mar 2009, ET Bureau
HYDERABAD: The government-appointed board of Satyam Computer Services has ruled out any change in the bidding process, even as the BK Modi-promoted Spice group threatened to pull out of the race to buy the scam-hit firm, citing lack of transparency.

The Spice group wanted the board to disclose the identity of qualified suitors, preferred an e-auction and was against a second round of shortlisting of bidders, said Preethi Malhotra, director of Spice Innovation Technologies (SIT), a special purpose vehicle floated by the Spice group to buy Satyam.

Group chairman BK Modi told ET he was still awaiting a reply from Justice SP Bharucha, former Chief Justice of India, who is overseeing the bidding process. But the Satyam board will not yield to Mr Modi’s demand, said a person familiar with the development. Another suitor for the beleaguered IT firm, Tech Mahindra, kicked off its due diligence on Friday. The company, an arm of the Mahindra group, is right now focused only on the telecom vertical. The acquisition will help Tech Mahindra diversify into other lucrative business segments such as retail, manufacturing, pharma and healthcare.

AS Murty, chief executive officer of Satyam, and his team gave detailed presentations on the firm’s business and its revenue streams. Tech Mahindra was also given a list of fixed assets of the company and its order book position from top clients.

The company will make similar presentations to other bidders over the next two days. Engineering firm L&T, IBM, private equity firm Apax Partners, besides another MNC and a private equity firm are in the race as ET had earlier reported. All bidders will be given access to the same information pack, based on which they have to put a price tag on the company.

The value of current assets and liabilities was disclosed to Tech Mahindra. The current assets include receivables, or payments, due from clients, while liabilities include payments due to vendors and salary outgo. The estimated value as on date of assets and liabilities is around Rs 700-800 crore. Satyam also has long-term liabilities, including a bridge loan of Rs 600 crore from banks.

Chairman of the Satyam board Kiran Karnik and other members - HDFC chairman Deepak Parekh, LIC nominee SB Mainak, former member of Securities Appellate Tribunal C Achuthan, former president of Institute of Chartered Accountants of India TN Manoharan - were present at Friday’s meeting with Tech Mahindra.

Another round of shortlisting is on the cards, and eventually the highest financial bidder will be selected. However, the uncertainty on Satyam’s financial position and legal liabilities have discouraged several firms from bidding. The firm, once ranked as India’s fourth-largest software exporter, has been struggling for survival after its disgraced founder B Ramalinga Raju confessed to perpetrating a Rs 7,000-crore financial fraud.