Tech Mahindra logs into Satyam

Satyam Computer Services Ltd. announced that its Board of Directors has selected Venturbay Consultants Pvt. Ltd., a subsidiary controlled by Tech Mahindra Ltd. as the highest bidder to acquire a controlling stake in the company, subject to the approval of the Company Law Board (CLB). Since there was no bid within at least 90% of Tech Mahindra's bid, which was the highest bid, the Board declared the Mumbai-based IT company as the highest bidder, Satyam said in a statement. Upon being declared the highest bidder, Tech Mahindra and the company executed a share subscription agreement within the company, it added.

Tech Mahindra has agreed to subscribe to 30.28 crore shares of Satyam, representing 31% of the share capital of the Hyderabad-based IT company after giving effect to the issuance of the initial shares at a price of Rs58 per share, thereby agreeing to infuse Rs17.56bn (or about US$351mn based on the exchange rate of Rs50 to US$1) into the company, Satyam said. The other two contenders - L&T and the Cognizant-Wilbur Ross consortium bid Rs45.90 a share and Rs20 a share, respectively.

Board members - Deepak Parekh and S.B. Mainak - abstained from discussion regarding the selection of the highest bidder, Satyam said. This was due to possible conflicts of interest since Parekh sits on the Board of the controlling shareholder of one of the bidders, while Mainak is the executive director of a significant shareholder of another bidder, it added.

The CLB approved a bid from Tech Mahindra to take over scam-tainted Satyam, while also offering immunity shield to the new directors to be appointed on the Satyam board by Tech Mahindra. Giving relief to Satyam, the CLB extended time limit for the IT company to declare quarterly financial results and file statutory documents up to December 31, 2009.

Meanwhile, the accounting standards regulator opposed the proposed sale of Satyam to Tech Mahindra before restating the accounts of the scam-hit IT company. "I am not happy with the deal as the company’s correct financial position was not yet known," Institute of Chartered Accountants of India (ICAI) president Uttam Prakash Agarwal said. He said ICAI would decide on taking up the matter with authorities concerned after its apex council meeting debates the deal.

Separately, B.K. Modi, whose Spice Group withdrew from the race for Satyam, expressed objections to the stake sale to Tech Mahindra. Modi said the process was not completed in a "transparent manner" and various guidelines set by the board and CLB were not followed. Modi plans to write to Justice S.P. Bharucha, who oversaw the sale process, and the CLB, objecting to the sale. Modi had earlier written to Bharucha complaining about the presence of common board members in Satyam and one of the bidders.