Some of the bidders for the controlling stake in Satyam are in talks for

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tieups with private equity funds based abroad. In some cases, PE firms themselves have initiated the talks.

The negotiations are happening in preparation for detailed expressions of interest (EoIs) that bidders must submit by March 20 together with proof of owning a chest of at least Rs 1,500 crore. The money requirement is part of the prerequisites set by Saytam.

The US-based iGate Corporation, among the bidders that submitted their initial EoIs on March 12, has already tied up with a PE firm in that country.

Phaneesh Murthy, chief executive officer of iGate, one of the bidders, told Financial Chronicle: “Showing reserves of Rs 1,500 crore is not a problem for us. We have a large US-based PE fund to back us. What we need to seriously consider is the financials that will be provided to us by the Satyam board.” He did not disclose the name of the PE fund.

TPG Capital, a large global PE firm, is believed to be negotiating with both iGate and Tech Mahindra, another of the four bidders which have so far publicly acknowledged to have filed their initial EoIs with Satyam.

The CEO of an investment firm familiar with the talks, who does not want to be named in this report, said, “TPG is in talks for an alliance. Despite the global meltdown, it has enough cash and an appetite for distressed assets.” The PE firm could be a potential partner of companies like iGate and Tech Mahindra, which might require funds to pull off the Satyam acquisition, he said. Spice and L&T are the other potential bidders for Satyam and have put in their EoIs. Spice is on record that it will fund the acquisition out of its free reserve. L&T’s funding plans are not yet clear. It has cash reserves, but may also use PE funds.

Puneet Bhatia, managing director of TPG in India, was not available for comment. Murthy of iGate, asked about the possibility of an alliance with TPG, refused to comment. TPG is known to have been buying assets mired in legal tangles.

A Mumbai-based investment banker claimed that Tech Mahindra had approached him for financial support but he said ‘no’, citing the “infinite liabilities” that might arise out of the class action suits filed against Satyam in the US.

Blackstone, another fund based in the US, is also believed to have put in its EoI and is in talks for an alliance. Its public relations firm, however, offered no comment. Blackstone’s India head, Akhil Gupta, was also not available for comment.

Ashmore Investments, a PE firm based in Britain, is also believed to be interested.

Investment bankers involved in the talks said the class action suits could force US companies to eventually back out of the bidding. Though Satyam’s valuations are low, its acquisition could still be daunting because the winning bidder will have to fight these suits which needs enormous amounts of money. “Class action suits could cost the acquirer more than $1 billion. This is huge money,” said another investment banker.

This is one reason, iBankers cite for some of the major American firms opting out after showing cursory interest. According to an iBanker close to Satyam sale process, three US-based IT companies -- IBM, Accenture and EDS – had explored options to bid for Satyam. All three companies reportedly held parleys with Satyam’s adviser Aventis over the past two weeks. However, none of them eventually evinced interest, citing reasons of huge liabilities arising out of US class action suits.

A senior IBM official, when contacted, told Financial Chronicle that the IT giant would not bid for Satyam as the liabilities are infinite. “We know that the class action suits are many. It's not just IBM, no other Amercian company will bid for it, if it gets to see the liabilities arising out of the class action suits, ” the official said.

Inputs from Sabarinath M and Anto Joseph