Deadline looms for Satyam suitors

March 12, 2009

, NEW DELHI, March 12 – Suitors for fraud-hit Satyam have to give notice on Thursday that they are interested in bidding for the Indian outsourcing giant amid lingering uncertainty over the true state of its finances.

Satyam has been battling for survival since January when its founder B. Ramalinga Raju, now in jail, declared he inflated the firm\’s balance sheet by more than one billion dollars and fudged its profits for years.

All interested buyers should register their interest in participating in the bidding process by 5:00 PM Indian Standard Time (1130 GMT) on Thursday, the company said in a statement on its web site.

A newspaper report Wednesday said the government-appointed board may give prospective buyers financial statements for the two most recent quarters to help them decide whether to make a full-fledged offer.

The statements would include revenue figures, client additions and operating margins but would not give bidders an idea of liabilities that Satyam may face, the Business Standard newspaper said, citing an unidentified source.

There was no immediate comment available from a Satyam spokesman on the report.

Any bidder for India\’s fourth-largest software services outsourcer has to consider potential liabilities from at least 13 lawsuits filed in US courts by defrauded shareholders who have seen the value of their shares slide.

Satyam\’s board announced Monday it had started the bidding process to sell off a 51-percent stake in the company based in the southern city of Hyderabad.

At least two companies are expected to file "expressions of interest" for a such a stake.

They are India\’s biggest engineering company Larsen & Toubro which already holds 12 percent of Satyam. India\’s Spice Group conglomerate, controlled by tycoon B.K. Modi, has also said it will file an expression of interest.

Satyam is valued at about 650 million dollars — a fraction of the seven billion dollars it was worth last May before India\’s stock market tumbled sharply and the fraud became known.

The company operates in nearly 70 countries and has close to 700 clients including 185 firms ranked in the Fortune 500. Its strong customer base could make it an attractive purchase, but its potential liabilities may act as a major deterrent, analysts say.

The sale of Satyam has taken on a sense of urgency with customer uncertainty over the company\’s future reportedly mounting following India\’s biggest ever corporate fraud.

Fund managers have been skeptical about the bidding process in the absence of accurate valuations for the firm. Satyam\’s auditors have said it could take up to six months for its full financial picture to emerge.

"There is no clarity on Satyam\’s valuations. On what basis can a bidder determine the true value?" said Hitesh Agrawal, head of research at Angel Broking.

Modi has said liabilities from the US lawsuits could range between 440 and 840 million dollars, according to Spice Group\’s legal advisors.

Any formal bid has to factor that in, he added.

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