iGATE Pulls Out of Satyam Bidding Process

Fremont-based iGATE has decided not to go ahead with the bidding process for acquiring 51% stake in India's scam-tainted Satyam Computer Services (SATYAMCOMP), based on further analysis.

Talking to CXOtoday, Phaneesh Murthy, CEO of iGATE, said, "While there is no one particular reason, it's the totality of concerns like sliding revenues, unknown margins and large liabilities that made us pull out of the race."

Murthy said, "We know that there are customer exits happening at Satyam. While the value erosion and the extent of liabilities were a concern, it was the totality of concerns that influenced our decision."

The company had earlier announced its participation in the bidding process last week, competing against some of the large Indian investors.

However, our PE fund partner had no role or influence in our decision to pull out. We had prepared our own model of financials and in that model it was difficult to get a reasonable return for any investor, said Murthy.

Satyam has been struggling for survival since January 7, when its founder and former chairman, B. Ramalinga Raju, confessed to filling the company's balance sheets with $1 billion in fictitious assets and nonexistent cash.

March 20 was the deadline set by the government-appointed Satyam Board for bidders to respond to the request for proposals the IT firm had sent out on March 13.

Sources indicate that potential bidders are concerned about the lack of clarity about the financial status of Satyam, as well as the implications of the class action suits and other legal troubles that the company is facing.

CXOtoday

iGATE Pulls Out of Race to Acquire Satyam

With Satyam's financial statement still not available and government yet to cap its liabilities, iGATE has all but given up its interest in Satyam.

With Satyam's financial statement still not available and government yet to cap its liabilities, iGATE has all but given up its interest in buying stake in Satyam. The new Satyam board has recently appointed a new CEO and CFO.

The company had earlier said it was waiting for the new financial statement before deciding its next step, as the Satyam board had ruled out any part buy option.

Talking to CXOtoday, Phaneesh Murthy. CEO of iGATE, said, "Our interest in Satyam is weaning now. If a portion of the company is not being sold, then it does not attract me."

Over the last few weeks, reports indicate that Satyam has lost several of its top employees and many clients are also moving away, thereby making the value proposition no longer interesting for iGATE. "I believe that delay in decisions will erode the value of the company because of migration of customers and employees," said Murthy.

It is believed that iGATE was keenly looking at acquiring the manufacturing and EPR verticals of Satyam that were dominant over the years. But with the board not likely to issue Satyam's financial restatement in the near future, many of the other suitors are likely to pull out as well.

iGATE was among the early prospects, along with Larson & Turbo (L&T) and Essar, to express interest in acquiring the fourth largest software service provider. Since then the board has received three Expressions of Interest (EoI) from Mahindra Group, Hindujas and Spice Communications.

CXOtoday.com