Key clients,staff threatening to quit: Satyam Board

Distressed IT firm Satyam said it aims to conduct a public auction for induction of a strategic investor in the company and sought the Company Law Board's approval for the same. The petition has been admitted by CLB,which would continue its hearing on Thursday.

Written by Agencies | New Delhi | Published: February 18, 2009 1:44:05 pm

Distressed IT firm Satyam on Wednesday said it aims to conduct a public auction for induction of a strategic investor in the company and sought the Company Law Board’s approval for the same.

While warning that many key clients and employees have threatened to quit the company due to its bad financial position,the government-appointed board of Satyam Computer also sought CLB’s nod for allotment of preferential equity and increasing its authorised capital to Rs 120 crore.

The petition has been admitted by CLB,which would continue its hearing on Thursday.

In its petition,Satyam has asked CLB to permit it “to devise a plan which provides for transparent,open and competitive process for continued operation” of the company in the interest of its all shareholders.

The company would also consider making “preferential allotment of equity shares or other securities for financing” its operating and capital costs and other financial needs without holding any Annual General Meeting,the petition said.

Satyam submitted that once the plan was approved and functional,the funds received by it would be kept in a ‘no-lien account’ with the IDIBI Bank and Bank of Baroda,which recently gave the company Rs 600-crore loan towards working capital needs,and would be used for revival of the company.

The company has also sought approval for raising its authorised share capital to 120 crore equity shares without holding any AGM.

At the end of last fiscal ended March 31,2008,the company’s authorised equity capital stood at 80 crore shares.

Satyam has also asked CLB to permit it to “conduct a transparent,open and competitive price bid auction” following relaxation of strict provisions of takeover norms by SEBI and to receive requests for pre-qualification of bidders for participation in the company as strategic investors.

The Satyam board,which was formed as per the CLB orders,would have full discretion to accept or reject such requests and furnish the pre-qualified bidders with the confidential information about the company on payment of a refundable fees of Rs 5 crore.

Satyam said it was facing ‘serious financial distress’ due to events that had unfolded since January 7,when its founder Ramalinga Raju disclosed massive financial wrong-doings for several years.

In its petition,Satyam said various clients had been asking about its long-term prospects and had either quit or have threatened to quit and therefore,it had become imperative for the company to have financial stability and liquidity to run and execute existing contracts and secure new businesses.

Besides,it was facing non-payment of income tax,provident fund dues,sales tax dues etc,which needed to be taken care of to facilitate continued functioning of the company,where monthly outflow were resulting into revenue gaps of several crores even after interim funding arranged by the board,it said.

The expenses like staff costs,rent and utilities also ran into several hundreds of crores,and besides,the company had a large number of staff sitting on bench,many of whom had not received any significant project throughout 2008.

“In such a scenario,cost cutting measures may not by themselves resolve the crisis of confidence caused by the mismanagement of the previous management,” it said.

Satyam also noted that its severe financial crunch had impacted the marketing and conversion of in-pipeline prospective customers,while it was also facing ‘significant threat of attrition of significant clients and key employees in charge of key accounts.’

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