Satyam Bidding Process

At last 8 bidders have entered the bidding fray for the Indian Enron- Fraud hit Satyam Computer Services. Among the 8 bidders are some of the top multinational companies including L&T, Spice Comm. and Tech. Mahindra.
Tare MNC suitors, who have entered the fray through special purpose vehicle (SPV) structures in an apparent move to insulate themselves from future legal risks. The structure and exact nature of the SPVs are not clear at this stage.
The next stage in the bidding process is the submission of the expression of interest (EoI) along with proof of $300 million cash. This is supposed to happen by March 20. At this stage, the bidders will have access to a ‘broad set of numbers’, as they get ready to put in a price bid.

While L&T being the most powerful contender with nearly 1800cr+ Rs inventory to show, Spice Comm. has entered the bidding by selling its 40.8% stakes in Spice to Aditya Birla Group's Idea Cellular last year making its bid strength to increase to 2720cr Rs.
Another entrant to bidding is Tech. Mahindra which currently is not having sufficient balances
to bid and would require to raise another 1000cr+ Rs. so as to be in the bidding arena.....

Enron Scandal

Enron Corporation has been one of the biggies in the field of Power and Electricity Generation.

The Company traces its roots to the Northern Natural Gas Company formed in 1932. But the company got a stand-alone reputation in 1979, by buying a lower rated Houston Natural Gas Group, and establishing Enron Corporation.

The Company had a good hold on American Power Business and was presented the best Power firm for 6 consecutive years. With a capital of above 100bn$, the company was strongly steering to become the ultimate in Power Business.

Company having more than 50% hold on American Market, was seen to be the next big thing in Global Economy.

But the company was caught in a fierce scandal when many revelations about financing and accounting reports came up. The Company's Auditor Firm, Arthur Anderson, was responsible for irregular accounting procedures conducted throughout the decade on 1990.

Company was on the verge of Bankruptcy within 6 months of the disclosure of the scandal.A White knight rescue attempt by a similar, smaller energy company, Dynegy, was not viable. Enron filed for bankruptcy on December 2, 2001.

The basis of scandal was the revelation that maximum part of profits and revenue of the company were due to the Special Purpose Entity.

Enron was using SPE's appropriately by placing non energy related business into separate legal entities. What they did wrong was that they apparently tried to manufacture earnings by manipulating the capital structure of the SPEs; hide their losses; did not have independent outside partners that prevented full disclosure and did not disclose the risks in their financial statements.

So the financial debts and the losses that it reported were not reported in the financial statements. This scandal caused dissolution of one of the largest firm Arthur Anderson.

As the news of scandal was on air many of speculations were made for the dissolution of the company, this lead to decrease in the faith of investors in the company. This lead to the downfall of the shares of the company from somewhere about 100$ to about 50 cents. This was the basic reason that the company was on the verge of bankruptcy.

Financial Instruments of the Company dragged down to such an extent that the market capitalization decreased to about 1% of what it had before the scandal.

Enron planned to retain their three cross pipeline business and also some external invested assets. Post Bankruptcy the company had to sell-off all its pipelines business to make a new entity CrossCountry Energy, making the Company a small shell with limited scope of development.

So as to pay the debts to the investors and to pay all the outstanding in the market the company resolved into a Enron Creditors Group Corporation. Its goal is to pay off the old Enron's remaining creditors and wind up Enron's affairs.........................

Who will be David for Satyam??

You have heard a lot and read a lot more already about what is being termed as India's Enron. So I am not going to blabber about the same.

After the ongoing scam-like situation leading into the so called, Biggest Fraud in the Corporate History of Corporate India Inc., rumours, as usual, are on air for speculating observances on the selling of Satyam.

The Hyderabad based giant is in talks with L&T board for further manipulation. All things might get clear by the end of the Board Meet on 31st Jan.

Speculatuions are getting ripe as L&T(having a stake of 4.4%) has increased its stake to about 12% in the fallen Goliath. According to the Company Law, if a company acuires above 15% stake of a private firm it has the rigth to take the company under its control.

Seeing the trend L&T has started the buying and is estimated to buy a large share of 7.6% more making it a 16% stake-holder, the highest is the list.

Data provided(as per the NSE and BSE) showed that, on Friday, L&T paid about Rs 176 crore to buy 5.1 crore shares of the IT company.

The two have been in serious talks so as to prevent attrition and other misfortunes for the company. LIC, IDBI, BoB(Courtesy: Economic Times) has provided cash assistance to Satyam so that they can pay the internal customers of the company, their wages, actually!! this is hapenning and true...............