Satyam board plans open auction for greater transparency

3 Apr 2009, ET Bureau



HYDERABAD: Satyam Computer Services on Thursday made minor changes in the bidding rules to select a new owner.


In a move aimed at ensuring greater transparency, the government-appointed Satyam board has decided to have an open auction if there is a 10% difference in the price quoted by the highest bidder and others. The highest bid, however, would become the floor price for the open auction.

For instance, if the highest bidder makes a bid of Rs 50 per share, then, bidders who have bid between Rs 45 and Rs 49 will qualify for the open auction in the second round. The floor price for the open auction would be Rs 50 per share. It could help the highest bidder and also ensure more money for the company.

An open auction was not considered in the initial terms and conditions where bidders were to enclose their financial bids in a sealed envelope. The change in rule will come into force only if one or more financial bids are at least 90% of the highest bid. Else, the highest bidder will be the new owner of the company.

Satyam has set April 9 as the deadline for submitting financial bids, after bidders qualify on technical grounds. Justice SP Bharucha, former Chief Justice of the Supreme Court, will open the financial bids, Satyam said in a letter to the US SEC and Sebi.

Six bidders, including engineering firm Larsen & Toubro, IT services firm Tech Mahindra and billionaire investor Wilbur Ross, are in the race for Satyam and are understood to have completed their due diligence of assets and liabilities.

BK Modi-promoted Spice group, which was interested in Satyam, has not inked the non-disclosure pact, a pre-requisite for doing due diligence of the beleaguered IT firm.

Mr Modi alleged that the bidding process was not transparent. He preferred an e-auction and wanted the board to disclose the identity of other bidders. Sources said the change in bidding rules was not in response to Mr Modi’s demands. “I have not been informed of the change in the bidding process. If informed, I plan to convene a board meeting to take a final view on bidding for Satyam,” BK Modi, chairman of the Spice group, told ET.

Satyam plunged into a crisis after its disgraced founder B Ramalinga Raju admitted to perpetrating a Rs 7,000-crore financial fraud. The government-appointed a board to salvage the firm, which now needs a capital infusion of around Rs 1,000 crore. A new owner is expected to be in place by mid-April.