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14 April 2024

Satyam board seeks new buyer to ensure company’s survival

India’s fraud-hit Satyam Computer Services yesterday announced that it had agreed on a process to find a buyer to help ensure its survival and would seek regulatory approval for the scheme next week.

Satyam, battling to stay in business since being engulfed in January by India’s biggest accounting scandal, also said it had won new work worth more than $250 million (Dh917.5m).

The “purchase orders and work extensions” reflected “an all-round positive trend”, Satyam’s government-appointed board said in a statement after meeting in Hyderabad where the company is based.

Company founder B Ramalinga Raju left the nation’s fourth-largest software services exporter reeling when he declared he had inflated the balance sheet by more than one billion dollars and had padded its profits for years.

“Recent successes include a single order of $50 m,” said Chief Executive AS Murty.

His statement came as the Economic Times newspaper reported two top clients – the world’s largest soft drink maker Coca-Cola and pharmaceutical giant GlaxoSmithKline – were ending their contracts with Satyam.

A Satyam spokeswoman said she could not comment on the reports due to client confidentiality rules.

Satyam operates in nearly 70 countries, with close to 700 clients including 185 Fortune 500 companies.

“The board is satisfied with the progress of the company’s stabilisation programme,” said Satyam Chairman Kiran Karnik.

The board meeting was held after India’s Company Law Board earlier in the week approved Satyam’s request to seek a strategic investor with enough funds to guarantee the future of the struggling company.

The Company Law Board said Satyam could increase its share capital in order to sell at least a 26 per cent stake. “The [Satyam] board today approved the process to be followed for inviting a strategic investor and decided to seek regulatory approvals early next week,” the company said.

“Upon receiving these clearances, the board would announce the process to be observed,” the company said.

At least four potential suitors, including engineering giant Larsen and Toubro, which already holds 12 per cent of Satyam, and Spice Corp, part of Indian tycoon BK Modi’s New Delhi-based holding company, have voiced interest in taking a controlling stake in Satyam.

The Business Standard daily reported the government wanted Satyam to seek a buyer ready to take a 51 per cent stake to bring in enough money to fund the company’s working capital needs and meet liabilities from class action suits.

Satyam faces a host of US class action suits from shareholders who have seen the New York Stock Exchange-listed stock dive by more than 70 per cent since the news of the fraud broke.

On Thursday, Satyam announced stringent cost-cutting steps, warning it faced “extraordinary” challenges due to its own financial woes and those experienced by companies around the world.