Satyam Computer Services Ltd kicked off a bidding process on Monday to sell a majority stake in itself and two potential suitors quickly confirmed they would join the race for the fraud-hit outsourcer.
Shares in Satyam jumped as much as 19 percent after gaining 20 percent on Friday, valuing the company at about $650 million, still just a fraction of the $7 billion it was worth last May. The broader market was down more than 2 percent.
"Nobody would like to take a shot in the dark, so the final bid price and outcome will clearly depend on the kind of information they are able to get about the company," said Tarun Sisodia, a Mumbai-based analyst at Anand Rathi Financial Services.
Satyam's government-appointed board is keen to bring in an investor to restore confidence among its roughly 50,000-strong staff and more than 600 customers, which include General Electric and Qantas Airways.
Analysts said bidders were attracted by Satyam's strong client base and its large workforce but setting a bidding price would be difficult without any audited accounts and clarity about its liabilities.
Satyam said in a statement bidders need to submit their interest by Thursday to buy a 51 percent stake. The bidders will then be asked to submit a detailed expression of interest and provide availability of at least Rs 1,500 crore ($290 million) by March 20.
India's top engineering firm, Larsen & Toubro Ltd, which controls about 12 percent of Satyam, will put in an expression of interest, but a formal bid will depend upon clarity on financial statements and the extent of Satyam's liabilities.
"It is not possible for us to say that at any cost we will bid," Y.M. Deosthalee, chief financial officer at Larsen & Toubro, told a private television channel.
New York-listed Satyam said qualified bidders will be shortlisted and given access to certain business, financial and legal materials and after completion of the due diligence process, bidders would need to submit their financial bids.
Satyam has been struggling for survival since founder and Chairman Ramalinga Raju shocked investors in January, saying Satyam's profits had been overstated for years and assets falsified in what has become India's biggest corporate scandal.
Raju, the managing director and the chief financial officer quit and were later arrested.
Satyam faces class-action lawsuits from U.S. shareholders that any new owner would have to assume some degree of liability for.
Another potential suitor diversified Spice Group said it would submit an expression of interest, but the Hinduja Group declined comment on whether it would join the race.
Spice Group Chairman B.K. Modi said he was comfortable with the bid rules and hoped the entire bidding exercise would be transparent. "I hope there are a lot of parties, then only there is fun in bidding," he said. Local media has said IBM may also bid for Satyam, but sources told Reuters the U.S. giant was unlikely to do so as the advantage of expanding in India was outweighed by the legal and financial risks related to the scandal.
Goldman Sachs and Indian investment bank Avendus Advisors are advising Satyam's board on the sale process.
Satyam Chairman Kiran Karnik has said the restatement of accounts would take time. The board had appointed KPMG and Deloitte in January to restate Satyam accounts.
Satyam said under relaxation of rules by the market regulator, there was no requirement to have a minimum floor price that was otherwise needed under Indian law for the initial subscription.