Satyam Allots First Round of Equity to Tech Mahindra

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Indian outsourcer Satyam Computer Services said on Tuesday that it had allotted 31 percent of the equity in the company to Venturbay Consultants, a subsidiary of Tech Mahindra, another Indian outsourcer that was selected to acquire a majority stake in the scandal-ridden company.

Tech Mahindra will have to wait for government approval before it can appoint its own representatives to the board of Satyam, a spokeswoman for Satyam said on Tuesday.

Its representatives however attend board meetings as invitees, and are involved in the management of the company, she added.

Tech Mahindra said last month that it will retain the current management of the company, including the CEO, after the transition. The company, which has BT as a key investor, is focused mainly on services to the telecommunication industry.

The financial scandal at Satyam came to light after company founder B. Ramalinga Raju said in January that the company's profits had been inflated for several years.

The Indian government soon after superseded Satyam's board, and set up a new board with six of its nominees. This board continues to run the company during the transition.

The six government nominees will also continue on the board until further notice from the government's Company Law Board, even after four nominees from Tech Mahindra are appointed to the board.

Satyam said it will use the funds it has raised through the allotment of fresh equity to Venturbay for general corporate purposes, including repayment of certain existing loans.

The company had to take loans to tide over a working capital crunch in January that at one point raised concerns whether it would be able to pay staff salaries.

Tech Mahindra will acquire through Venturbay another 20 percent of the equity through a public offering to other shareholders of Satyam. The offer is scheduled to open on June 12, and will close on July 1.

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