NRI industrialist B K Modi, whose Modi group is interested in acquiring Satyam Computer, today said that the stock market valuation could not be the basis for putting a reserve price for the sale of the troubled IT firm.
Asserting that only auction could determine the sale price for Satyam, Modi said that stock market price could not be considered a benchmark in this case, as the market was not fully aware about the firm’s actual assets and liabilities.
“The auction will determine the price... Why you require a reserve price ... Reserve price will only create controversy,” Modi said.
Besides the Modi group, domestic engineering major L&T and the Hinduja group are also interested in acquiring Satyam. A board member of L&T, which has already purchased about 12 per cent stake in Satyam from open market, yesterday said that the company was waiting for the Satyam board’s decision on pricing mechanism to consider its next step.
Earlier this month, the Company Law Board (CLB) allowed Satyam’s government-appointed board to go-ahead with a public auction to bring in new owners for the company.
“What is the indicative figure...Books are not there. It cannot be the market, because market is not even aware what the assets and liabilities of the company are,” Modi said.
“Even the board is not aware (about the assets and liabilities), so the market is working on the available information. So, I don’t think there could be any basis of reserve price,” Modi added.
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“You can’t take market price for reserve price because market is not self aware of all these liabilities,” he asserted.
The government had superseded the Satyam board last month after its founder and former Chairman B Ramalinga Raju admitted financial wrongdoings at the company for the past several years, which entailed overstatement of cash position and profits and under-statement of liabilities.
Investigations are currently on in the Rs 7,800-crore fraud at Satyam and the new board has mandated global auditing majors KPMG and Deloitte to restate its accounts.
The company’s auditors Price Waterhouse had said that its auditing of the Satyam books should not be considered reliable as they were based on statements provided by the Satyam management.