B K Modi-owned Spice Group, which completed the second round of bidding for Satyam Computer Services, today withdrew from the race to buy the troubled company, citing “lack of transparency in the bidding process”.
Spice Corp has written to the government-appointed Satyam board, with a copy to former Chief Justice S P Bharucha who will oversee the bidding process, expressing concerns and asking the board to consider an open auction for Satyam and increased transparency, besides disclosing the names of the other bidders for Satyam.
“We are withdrawing from the race for now, and will only reconsider our decision if these concerns are addressed,” said Preeti Malhotra, executive director, Spice Innovative Technologies, a Spice Group unit, adding: “The Company Law Board (CLB) and market regulator Securities and Exchange Board of India (Sebi) bent the rules for Satyam on grounds that the bidding process would be competitive. In this regard, we have urged the Satyam board to ensure that the process be open, transparent and a price-bid auction one.”
Meanwhile, the government-appointed board of Satyam met informally in Hyderabad today to discuss issues of transparency that some bidders have raised, it is reliably learnt. The due diligence process has begun and is expected to continue till the first week of April.
Teams from the shortlisted bidders are camping at the Satyam headquarters to verify documents and other critical information needed to submit the financial bids. Homi Khusrokhan, former Tata Chemicals managing director and special advisor to the Satyam board, is understood to be making presentations to bidders, a process that is expected to continue till March 29.
Most bidders, however, have expressed concern over Satyam’s financials and liabilities. Engineering and construction giant Larsen and Toubro (L&T), having acquired 12 per cent in Satyam, has so far invested around Rs 670 crore in the company. It sees a lot of synergy between the beleaguered software giant and L&T Infotech, its unlisted subsidiary. However, L&T CMD A M Naik recently admitted that many things have changed in the past few weeks, and that some key clients have moved out, as have several key employees.
A team from the Mahindra and Mahindra group’s IT business Tech Mahindra — which has successfully completed its second round of bidding — is also understood to be in Hyderabad for due diligence.
The concern for M&M will be raising capital from overseas for the acquisition, especially after it was downgraded by Fitch. As of December 31, 2008, Tech Mahindra had cash and cash equivalent of $110 million (around Rs 550 crore). Incidentally, Deepak Parekh, member of the Satyam board, has been a Mahindra and Mahindra board member since 1990.
iGate, which had participated in the first round of bidding, backed out from completing the second round. Earlier, the Hinduja group had decided to opt out. There’s no confirmation or denial on the participation of global majors like IBM or that of PE firms.
