BANGALORE BUREAU, 3 JULY 2009 - Tech Mahindra may have to ask Satyam Computer Services for a preferential issues of shares to continue its bid to take over the troubled outsourcer.
Tech Mahindra did not get an adequate response for its open offer to shareholders of Satyam, which closed on Wednesday, a company spokesman said on Friday.
Tech Mahindra, which acquired a 31 per cent stake in the scandal-ridden Indian outsourcer through a preferential allotment of equity, made an offer last month for an additional 20 per cent stake to be bought from the company's shareholders.
Tech Mahindra won the bid in April to acquire a majority stake in Satyam, which was plunged into a financial crisis in January after its founder B. Ramalinga Raju said that the company's revenue and profits had been inflated for several years.
However the public offer price agreed in the bid agreement in April fell far short of the current market price of Satyam's shares.
The share price started moving up in June after the company released unaudited results for the fourth quarter of last year, and for January and February this year. The results showed that Satyam's revenue and profits were down in the fourth quarter from a year earlier.
But the company posted a larger profit of 520 million Indian rupees (US$10.8 million) in February, while in January when it profited only 40 million rupees.
The company's share price also received a boost after Tech Mahindra moved to take charge of the company.
The share price has hovered at over 70 rupees, far higher than the public offer price of 58 rupees. Satyam shares closed at 77.2 rupees on Thursday on the Bombay Stock Exchange (BSE).
In a filing to the BSE on Wednesday, Tech Mahindra said that the registrar of the open offer, in consultation with Tech Mahindra and its agents, is in the process of counting the shares tendered by the public.
The company said that in the event of the shares tendered by the public being less than the offer, it will approach Satyam for an issue of shares to make up the deficit.
If not enough shares are offered, Tech Mahindra will ask if Satyam can issue shares to make up the deficit.
The shares will be priced at 58 rupees each, in line with the share subscription agreement between Satyam, Tech Mahindra, and Venturbay, an investment subsidiary of Tech Mahindra.
The issue of shares through a preferential issue of fresh equity will increase the number of shares of Satyam. For the same number of shares acquired, Tech Mahindra will now get a 42.7 per cent stake in Satyam, rather than the 51 per cent originally planned.
Tech Mahindra has not decided whether to acquire more shares to hike its stake to 51 per cent, the company spokesman said.
Tech Mahindra consolidated its control over Satyam last month, by adopting a Mahindra Satyam go-to-market brand for the company, and appointing Mahindra Group executives to the CEO, CFO, and executive vice chairman positions.
The government's six nominees to the board, who were appointed in January after the crisis broke, continue in place by government order, though they may be withdrawn by the government this week, according to sources.
