Strategic investor for Satyam Computer Services

Much has been talked about conjecturing on what could possibly be an attractive stake for an investor to have strategic interest in the company. Whether 26% would do or nothing less than 51%. While the company’s board has stated before the honourable CLB , inter alia , that to enable the company to induct a strategic investor with equity capital, the authorized equity capital has to be increased from 160 cr to 280 cr and also to make preferential allotments. Ms. Pallavi Shroff submitted that no strategic investor would be interested unless a minimum of 26% of the enhanced equity capital is allotted on a preferential basis.

Since honourable CLB has permitted the company to increase the authorized capital from 160 cr to 280 cr, accepting the merit of the board’s case , there should not be any hindrance for the compay to go ahead and raise 120 cr of equity capital , make preferential allotment of shares at par or at a premium and induct a strategic investor. This 120 cr will be roughly 42% , which should be adequate for the investor to feel confident as regards it’s holding in the company. At any rate it is a paltry sum to be paid for what Satyam is potentially worth.

It is now widely accepted , particularly after the CLB order that a strategic investor is necessary who will chart out a revival plan for the company, regain confidence of clients, further the business of the company and in general put the house in order. The hapless shareholders will then find a reason to cheer after a traumatic erosion of shareholders wealth.
As it is, the current economic scenario is making life difficult for even the established players and a beleaguered one needs all the help. The company should therefore quickly get on with the job at hand.