Satyam board seeks new buyer

February 21, 2009

, NEW DELHI, Feb 21 – The board of India\’s Satyam Computer Services met on Saturday to discuss finding a buyer for the fraud-hit outsourcing giant which has warned its survival is at risk unless it gets new funding.

The meeting of the government-appointed board came after the Company Law Board earlier this week approved Satyam\’s request to find a strategic investor with enough funds to guarantee the future of the struggling company.

The board was meeting to discuss "induction of a strategic partner and how much time is required to finalise the bidding process," Satyam chairman Kiran Karnik said.

At least four potential suitors, including engineering giant Larsen and Toubro, which already holds 12 percent of Satyam, and Spice Corp, part of Indian tycoon B.K. Modi\’s New Delhi-based holding company, have voiced interest in taking a controlling stake in India\’s fourth-largest software services exporter.

Satyam\’s founder B. Ramalinga Raju left the company in turmoil when he declared in early January he inflated its balance sheet by more than one billion dollars and had falsified its profits for years.

The board has been looking at divesting a 26 percent holding by increasing Satyam\’s authorised share base to bring in new funds.

But the Business Standard daily reported Saturday the government wanted Satyam to seek a buyer ready to take a 51 percent stake to give the firm enough money to fund working capital needs and liabilities from class action suits.

Satyam faces a host of US class action suits from shareholders who have seen the New York Stock Exchange-listed stock dive by over 70 percent since the scandal broke.

The Economic Times newspaper, meanwhile, said the board was considering imposing a three-year lock-in on any buyer to discourage "frivolous" bidders.

Separately it also reported two top clients — Coca-Cola and pharmaceutical giant GlaxoSmithKline — were ending their contracts with the company.

A Satyam spokeswoman said she could not comment on the reports.

But Satyam said earlier in the week in its request to the Company Law Board for permission to find a buyer that many important clients and employees had threatened to quit the company due its weak financial position.

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