Increases stake to 12%, may demand board seat now; iGate Corp also joins race.
Engineering and construction giant Larsen and Toubro (L&T) appears to be closing in on an open offer for troubled software firm Satyam Computer Services. The firm today raised its stake in Satyam to 12 per cent from 4.48 per cent, a move that saw the stock zoom 31 per cent on the Bombay Stock Exchange (BSE), though the Sensex fell 139.5 points.
Under takeover rules, L&T will have to make an open offer if its stake touches 15 per cent. The additional stake purchase, done through bulk deals today, has cost L&T around Rs 177 crore.
YM Deosthalee, chief financial officer of L&T, said, “We want to make sure our interests are protected. We have not yet decided whether to increase the stake further."
Though Deosthalee did not want to elaborate, sources familiar with the developments said that looks a distinct possibility. They added that L&T will now demand a board position in Satyam to protect its investment.
The L&T move to raise its stake took market players by surprise given the company's statement a week ago that it would not increase investment in the company till there is clarity on Satyam's exact financial position.
L&T's stock has been hammered in the last two weeks after it disclosed its investment in Satyam. The share price has fallen 22.01 per cent so far in January against the Sensex’s fall of 12.41 per cent. The scrip fell 3.47 per cent today.
L&T today bought 39 million shares, or 5.79 per cent of Satyam, in a block deal on the National Stock Exchange (NSE) at Rs 34.52 a share, costing the company Rs 134.73 crore. In another transaction on the BSE, the company picked up 12 million shares for around Rs 42 crore at a share price of Rs 35.07.
Earlier this month, L&T through its wholly-owned subsidiary L&T Capital bought over 4 per cent in Satyam for around Rs 380 crore at Rs 170 a share. Immediately after that, on January 7, former Chairman of Satyam B Ramalinga Raju confessed to fudging the company's accounts for several years, causing the scrip price to plunge.
In the December-ended quarter, retail investors increased their stake in Satyam at least 5 per cent after the promoters’ stake fell to 2.18 per cent from 8.61 per cent. L&T could have bought stake from these investors, sources said.
Another suitor: Meanwhile, Phaneesh Murthy-headed IT services provider iGate Corp, today said it would be interested in buying the company, or portions of it that make sense to its business. iGate, which has around Rs 315 crore cash, is also in touch with private equity (PE) firms for possible funding.
iGate chief executive officer Phaneesh Murthy said, "I have been in touch with a couple of private equity players to raise some funds. Our talks have been positive and suffice to say at this point that raising money for the deal will not be the biggest challenge."
More than fund-raising, a clear assessment of Satyam's liabilities of Satyam would be key to understanding how much money is required to carry out a strategic acquisition, according to Murthy, a former Infosys executive.
"The extent of the liability will determine whether raising the money will be a challenge or not," he said. He, however, qualified that iGate would not be interested in buying Satyam if the liabilities exceeded Rs 6,000 crore.
What the new board said: Meanwhile, the six-member government-nominated board today announced that additional funding arrangements are in the final stages of being concluded -- a formal announcement is expected before 28 January -- to meet the company’s operational needs till the end of March 2009, according to Deepak Parekh, Board Member. Today's meeting was chaired by Tarun Das -- its third in 13 days.
The board also clarified that the company's immovable properties -- including all campuses its owns -- are free of encumbrance. In an emergency, this would help the company meet operational expenses. Moreover, the collections from receivables have been robust, so far, according to the board.
The board also announced that it has narrowed the shortlist for the CEO and CFO to three, and would finalise their decision in the ensuing week.
The Board also said it met a number of investment bankers and will take a decision in the next few days. It assured investors that customers continue to release new work orders and are expressing positive opinions on timely delivery.
Judicial custody extended: The board also said there was no basis to doubt the public prosecutor's statement Thursday that Satyam had overstated its headcount for 13,000. The independent investigation is expected to reaffirm this fact in the coming weeks. The Board is expected to meet again January 26 and 27.
Meanwhile Gopalakrishna Raju, general manager of SRSR Holdings Private Limited, confessed that Ramalinga Raju and others had bought large tracts of lands, according to Andhra Pradesh Criminal Investigation Department (CID) public prosecutor Ajay Kumar.
SRSR Holding is owned by Ramalinga Raju's brother Suryanarayana Raju to which shares were transferred from the Satyam promoters’ group.
Public prosecutors had presented Gopalakrishna's case while presenting their case against granting bail to the accused. The CID police have taken Gopalakrishna into custody and are questioning him. He is yet to be produced in court.
It was also revealed that BNP Paribas, reported to be the corporate bank of Satyam, had written to the investigating officials on January 21,, explaining that the fixed deposits claimed to be with it (BNP Paribas) are non-existent. BNP has clarified there are no outstanding fixed deposits with it and that there were no transactions with Satyam after March 31, 2004.
Setbacks The Serious Fraud Investigation Office (SFIO), too, today filed an application before the Sixth Metropolitan Magistrate in Hyderabad, seeking permission to question Ramalinga Raju, Rama Raju and CFO Srinivas Vadlamani. SFIO has sought six days to question the trio. The court, however, returned the application asking SFIO's standing counsel S Ravindra Reddy to refile it after ascertaining the maintainability (in the court) and jurisdiction (of the court).
The Securities and Exchange Board of India's (Sebi) plea to question Ramalinga Raju and Vadlamani was also rejected by the Nampally court here on grounds of maintainability and jurisdiction.
