The government is understood to be in favour of selling a 51 per cent stake in the beleaguered Satyam Computer Services [Get Quote], so that the ailing firm can raise sufficient funds to meet its working capital expenses and liabilities from the class-action suits.

This assumes significance because the six-member government-nominated board was in favour of Satyam divesting a 26 per cent shareholding, on the assumption that there would not be a sufficient number of bidders.

If the government's view prevails, a successful bidder would have to pay between Rs 4,000 crore and Rs 5,000 crore for the 51 per cent stake. Acquisition of an additional 20 per cent shareholding through an open offer would be over and above these conditions, said sources close to the development.

The board is expected to take a final decision to this effect early next week.

The actions follow Company Law Board (CLB) approval yesterday for Satyam to sell equity to a strategic investor. In its order, the CLB said the strategic investor should be selected through an open-bidding process that will be overseen by a retired High Court chief or a Supreme Court judge.

The ministry of company affairs, sources noted, is in favour of these conditions since the ailing company needs sufficient funds to refurbish its balance sheet. The government, it is learnt, is also of the view that the strategic investor should bring in sufficient funds into the company to meet any eventuality that may arise out of the 13 class action suits filed in the United States.

If the board decides to invite bids for 51 per cent, Satyam will have to issue around 697 million shares of Rs 2 each to expand the capital base from the current base of 670 million shares. At the average market price of around Rs 50, the deal would fetch around Rs 3,500 crore.

On the other hand, if the company divests only 26 per cent, it would have to issue only 235 million shares and raise only Rs 1,200 crore, which may not be sufficient, sources said.

Moreover, if Satyam divests 51 per cent, the average share price for the open offer would be lower than if the company divests 26 per cent (because in this case, the shareholder would benefit rather than the company, since the pricing would be more aggressive).

Satyam board member Tarun Das recently revealed that six or seven companies  -- both Indian and global IT, manufacturing and PE firms  -- have approached the firm for a complete buyout. To evaluate this, the company's legal advisors Amarchand Mangaldas have appointed KPMG and Deloitte, who will give their findings in six weeks.

The strategic investors include Larsen and Toubro (which now has a 12 per cent stake in Satyam and has invested around Rs 670 crore in the company so far), Tech Mahindra [Get Quote], Aegis BPO (which is only interested in the BPO business), and the iGate-PE combine. L&T, in fact, has categorically expressed its interest to the government in acquiring management control in Satyam.