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SATYAM Computer Services has won crucial approvals to increase its capital base and rope in strategic investors, setting the stage for what is likely to be a keenly-contested bid war critical to ensure the company’s survival.

The Company Law Board (CLB) permitted the scandal-hit software company to raise its authorised capital to Rs 280 crore from Rs 160 crore, or to 140 crore shares from 80 crore shares, and allowed it to induct a strategic investor through a competitive auction process.

The company was also allowed to allot the new shares on a preferential basis at par or at a premium.

“Induction of a strategic investor would be in the interests of not only the company but also that of all stakeholders. Since any strategic investor would like to have adequate equity shareholding that would enable the investor to constitute its own board, it would be necessary to make a preferential allotment to the said strategic investor,” CLB chairman S Balasubramanian said in his order.

Engineering major Larsen & Toubro (L&T), Mahindra & Mahindra Group firm Tech Mahindra and BK Modi-owned Spice Group are some of the suitors that have declared their interest in Satyam, once ranked among the stars of India’s IT sector and brought to the brink of collapse by a huge financial scandal engineered by its founder.

The company’s survival was put into doubt after its founder and former chairman B Ramalinga Raju admitted last month that he had falsified its accounts for years and said its cash pile was non-existent. Investors dumped the company’s stock, clients cancelled contracts and the government sacked and replaced its board of directors with its own nominees.

The new board chaired by former Nasscom chief Kiran Karnik has since sought to steady the company, engaged with clients, secured loans to run operations and appointed investment banks Goldman Sachs and Avendus to find strategic investors. The company needs a strategic investor to bring in new management, pump in funds to pay employees and run operations, and prevent clients from jumping ship.

The CLB, which appointed the company’s new board, said the competitive bid process would be subject to the company obtaining the necessary approvals from market regulator Sebi. The Satyam board was also ordered to put together a plan that provides for an open and competitive bid auction overseen by a retired judge of the Supreme Court to ensure a transparent bid process.

The Spice Group, one of Satyam’s potential suitors, once again insisted the need to follow a transparent auction process.

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