IBM and L&T named as potential suitors
IBM Corp and the Indian engineering and construction firm of Larsen & Toubro are being mooted as most likely takers for the embattled Indian IT services outfit, Satyam Computer Services Ltd.
The market speculation followed news this morning that the Securities and Exchange Board of India had approved plans for Satyam to sell 51% of the company.
Minister of corporate affairs PC Gupta has already confirmed that any bid for Satyam would not be restricted to Indian companies. As well as IBM and L&T, potential suitors have been named as Hinduja Group and the Spice Group.
The company lost its top executives at the start of the year after they admitted the business had carried inflated cash and bank balances, non-existent accrued interest and an overstated debtor position.
Company chiefs admitted that the company reported revenue of INR27 billion and an operating margin of INR6.49 billion (24% of revenue) in the second quarter ending September 2008, as against the actual revenue of INR21.12 billion and an actual operating margin of INR610 million (3% of revenue). This had resulted in artificial cash and bank balances going up INR5.88 billion in Q2 alone.
Satyam has confirmed that the acquisition by the selected investor will follow a prescribed sequence, where the interested party buys newly issued equity shares representing 31% of the company’s share capital, followed by a public open offer to purchase another minimum slice of 20%.