On second thoughts, and a third, US-based outsourcing company iGate today decided to withdraw from the race for Satyam Computer. iGate was a bidder for the beleaguered software company along with the Spice Group, Larsen & Toubro (L&T) and Tech Mahindra. The company was partnering with a $5.5-billion US-based private equity fund to bring in the required money.
iGate CEO Phaneesh Murthy had earlier said that while money was not an issue in bidding for Satyam, the company's current market valuation was not enticing enough to make an open offer. Besides, iGate has been worried about lack of clarity on financials as well as other liabilities plaguing Satyam's books.
At today's share price of Rs 43.90 (86 cents), Satyam is valued at about Rs 3,000 crore. Murthy had earlier told news agencies that his company could bid below 90 cents a share, but at the same time, expressed fears of continuing value erosion in the company. The company’s legal liabilities alone are currently estimated at around $100 million.
However, the news that Satyam would take even up to July this year to disclose its earnings position for the December and March quarters and tabulate its liabilities, appears to have discouraged iGate from proceeding into the bidding process.
iGate's challengers in the race for Satyam are known to be equally worrried about being in the dark on the Hyderabad-based firm's liabilities and consistent value erosion, besides lack of clarity on its 2009 revenues.
Apprehensions of more customer exits and fall in ongoing contract values will be other key issues. Two high-profile customer exits since January were that of US-based State Farm Insurance and Australian telecom giant Telstra. Satyam executives have refused to answer questions on individual clients, but have at the same time, persisted with their claim of winning new contracts worth $250 million in the past two months. "It is true that new contracts have been signed, but new contracts do not mean new customers. Pricing pressures have been high, and going ahead, you can expect considerable value erosion on the earnings front too," where an industry analyst said.
Disgraced Satyam founder Ramalinga Raja had admitted to inflating earnings to the tune of Rs 7,800-crore on the company's balance-sheets in a letter to the Sebi on January 7.
