Satyam gallops as 47% equity stake change hands

Satyam Computer Services galloped 31.25% to Rs 38.85 on massive total of volumes of 31.40 crore shares on the BSE and the NSE, buoyed by reports the company is looking at roping in a strategic investor and iGate eyeing part stake.

Meanwhile, the BSE Sensex was down 139.49 points, or 1.58%, to 8,674.35

The Satyam counter has average daily volume of 1.22 crore shares in the past one quarter.

The stock hit a high of Rs 39.30 and a low of Rs 28.50 during the day. The stock had a 52-week high of Rs 544 on 30 May 2008 and a 52-week low of Rs 11.50 on 9 January 2009.

The stock had underperformed the market over the past one month till 22 January 2009, falling 81.77% as compared to the Sensex's 11.23% fall. It had also underperformed the market in the past one quarter, falling 90.39% as compared to the Sensex's fall of 13.33%.

The mid-cap software exporter has an equity capital of Rs 134.77 crore. Face value per share is Rs 2.

Reports of software firm iGate interested in acquiring parts of fraud hit IT firm whose board has been approached by domestic and foreign companies for a possible merger or sale, buoyed the counter. iGate is interested in a dialogue with Satyam and currently are quiet keen and comfortable to acquire selective portions of the business, reports quoting iGate's CEO Phaneesh Murthy revealed.

Meanwhile, other set of reports indicated Sataym is looking at roping in a strategic investor. Goldman Sachs has emerged as the front-runner in the race for an investment banker for Satyam Computer as the new board gears Satyam office up to rope in a strategic investor to value and script a revival strategy for the beleaguered software firm.

The six-member Satyam board, which met on Thursday (22 January 2009), discussed the appointment of a new CEO and CFO, and looked at funding options to tide over the grave liquidity crisis. Search firm Egon Zehnder has been appointed to help identify a CEO for the firm.

Reports further added that L&T's IT arm, L&T Infotech and Tech Mahindra have already expressed their interest in Satyam. L&T, which currently owns 4% equity shareholding in Satyam, is keen on raising its shareholding.

It is reported that most companies that are looking at buying Satyam would want to see the re-stated accounts before they take a final call. People familiar with the development say this could take some time as re-statement of accounts over the last couple of years is likely to take up to a couple of quarters.

Also, there has been interest from private equity investors such as the Texas Pacific Group and General Atlantic for Satyam. In most of these cases, these PE investors are likely to tie up with an Indian company for a bid on Satyam.

L&T is also understood to be preparing a blueprint for the revival of the company. It is working closely with KPMG, which has been asked to do advisory work for Satyam.

The software company's board had mandated both KPMG and Deloitte to restate the accounts of the company, after chairman B Ramalinga Raju admitted he had doctored accounts.

Meanwhile, Raju, the founder of Satyam, is reported to have padded employee numbers to siphon off cash and forged documents to support fake bank deposits.

Satyam had about Rs 3300 crore of 'fictitious and non-existent' accounts, public prosecutor K Ajay Kumar told a hearing for the company's arrested founder Ramalinga Raju on 22 January 2009. The Hyderabad-based company had 40,000 employees, short of the 53,000 claimed by Satyam, he added.

The falsified employee data was used to siphon off Rs 20 crore every month and one fixed deposit receipt from HDFC Bank was forged, the prosecutor told the 6th Additional Chief Metropolitan Magistrate's court in Hyderabad.

The accounting fraud has hit Satyam's business prospects and has triggered worries some clients may cancel contracts.

Raju admitted that Satyam's balance sheet as on 30 September 2008 had inflated cash and bank balances of Rs 5040 crore, inflated debtors of Rs 490 crore and non-existent accrued interest of Rs 376 crore. Against this the liability was understated by Rs 1230 crore.

Raju said the Q2 September 2008 results had overstated operating revenues by Rs 588 crore, thereby overstating the operating profits and cash to that extent.

The gap in the balance sheet had arisen purely on account of inflated profits over the period of last several years, Raju confessed adding that every attempt made to eliminate the gap failed. As the promoters held a small percentage of equity, the concern was the poor performance would result in a takeover, thereby exposing the gap, Raju said.

Raju said in the last 2 years a net amount of Rs 1230 crore was arranged to keep operations going. He said this was done by pledging all the promoter shares and raising funds from known sources by giving all kinds of assurances. Significant dividend payments, acquisitions, capital expenditure to provide for growth did not help matters. Every attempt was made to keep the wheel moving. The last straw was the selling of most of the pledged share by the lenders on account of margin triggers, Raju said.

The aborted Maytas acquisition deal was the last attempt to fill the fictitious assets with real ones, Raju said. Maytas's investors were convinced that this is a good divestment opportunity and a strategic fit, he said.

Both BSE and NSE have excluded Satyam Computer from their respective key benchmark indices with effect from, 12 January 2009. Sun Pharmaceuticals Industries has replaced Satyam on the Sensex, while Reliance Capital has replaced Satyam on the Nifty.

Satyam Computer Services is a global business and information technology services company. It delivers consulting, systems integration and outsourcing solutions to clients.