Embattled Indian outsourcer Satyam Computer Services said Wednesday it has decided to offer fresh equity to Tech Mahindra after the new owner failed to get a majority stake from a public offer to Satyam shareholders.
The Company Law Board of the Indian government on Tuesday authorized Satyam to issue shares to make up the deficit after Tech Mahindra's public offer for 20 percent of Satyam's equity did not get adequate response.
Shares offered for sale by shareholders in the public offer were less than 0.1 percent of Satyam's outstanding shares, at the close of the offer on July 1, Tech Mahindra said on Monday.
Tech Mahindra was selected as a winning bidder in April to acquire a majority stake of 51 percent in Satyam. The outsourcer 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.
Tech Mahindra acquired a 31 percent stake in Satyam in May by an issue of fresh equity.
Under the bid agreement, the company had to make a public offer for 20 percent of Satyam's shares at the 58 Indian rupees (US$1.2) per share that it paid for the first round of equity.
However, Satyam's share price rose in June to over 70 rupees on Indian stock markets 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 profit in February had risen to 520 million rupees in February from 40 million rupees a month earlier.
A Tech Mahindra spokesman said Friday that it was unlikely that a lot of shareholders would tender shares at the offer price.
Satyam will now allot 198.66 million shares of the company on a preferential basis to Venturbay Consultants, a subsidiary of Tech Mahindra, at 58 rupees a share.
The issue of fresh equity to Tech Mahindra will not, however, give the new owner a majority share in the company, as the issue of shares through a preferential issue of fresh equity will increase the number of shares in the company. For the same number of shares acquired, Tech Mahindra will now get about 43 percent stake in Satyam, rather than the 51 percent originally planned.
Tech Mahindra has not made a decision as to whether it will now try to acquire a majority 51 percent stake in the company, a company spokesman said Friday.