The Hindu Business Line : CLB sets in motion process to revive Satyam Computer

In a move that sets the stage for the buy-out of Satyam Computer Services Ltd, the Company Law Board on Thursday allowed the Government-appointed board to bring in a strategic investor through an open bidding process. For this purpose, the CLB also permitted the board to increase the authorised share capital and issue preferential shares.

With this, the prospective bidders such as L&T, SpiceCorp, and Hinduja Group can work out their buy-out strategies. The CLB Chairman, Mr S. Balasubramanian, in his order, said, “Since any strategic investor would like to have adequate equity shareholding which would enable the investor to constitute its own board, it would be necessary to make a preferential allotment to the said strategic investor.”

Currently, the authorised capital of Satyam is 80 crore shares of Rs 2 each, of which 67.3 crore shares have already been issued. The CLB has authorised the Satyam board to pass a resolution to amend the capital clause of the memorandum of association to raise its authorised capital. Accordingly, the authorised capital of Satyam will increase from Rs 160 crore comprising 80 crore shares, to Rs 280 crore comprising 140 crore shares.

Further, the resolution so passed shall be deemed to be one passed in a general meeting in terms of the Companies Act, the order said.

On preferential allotment, the CLB has allowed the Satyam board to pass a resolution authorising itself to make such an allotment at par or at a premium. The order also said that such a resolution would be deemed to be a special resolution passed in a general meeting in terms of Section 81 (1A) of the Act.

Currently, the Act stipulates that shareholders’ nod is required for preference share allotment. But, under the prevailing circumstances, the Satyam board decided to seek CLB nod for completing the bidding process before approaching the shareholders.

In fact, this is not the first time that the CLB, which has overriding powers on all sections of the Companies Act, has allowed a company to first issue shares and later seek shareholders’ nod, official sources told Business Line. The order, however, stipulates that before allotting shares, the Satyam board will have to seek the CLB nod giving full details of the process.

The Satyam board has been directed to devise a mechanism for ‘transparent, open and competitive process without furthering the interest of any particular acquirer’.

Besides, the board will also have to obtain requisite approvals from the SEBI. The process of selection of a strategic investor will be overseen by a retired judge of the Supreme Court or former Chief Justice of India.

‘Good move’

When contacted, Dr B. K. Modi, Chairman, SpiceCorp, said, “This is a good move. The issue of 72 crore additional shares translating into about 51 per cent extended capital means that the new investor will get a level-playing-field. So it does not matter who has how much stake, currently.” Dr Modi, however, declined to divulge how much the company was willing to shell out to gain control of Satyam.

Another potential suitor Hinduja Group also welcomed the CLB decision. “I think they will now have to follow a specific process. The board had appointed Goldman Sachs and we have already put in our interest to them. We will wait. As and when they lay down the particular procedure, we will get into that,” Mr Ashok Hinduja of Hinduja Group said.

However, L&T, which already has a stake in Satyam, said that it would not like to comment at this stage and will respond at an appropriate time.

More time given

In a related development, the CLB granted more time (till March 31) to three former directors of Satyam to submit their replies in connection with the scam. These include former interim CEO, Mr Ram Mynampati, as well as former independent directors, Mr Krishna Palepu and Mr Vinod Dham.

Meanwhile, the discussion on Satyam issue in the Lok Sabha was deferred to February 25.