UPDATE 1-India's Spice joins race for fraud-hit Satyam
* Spice wants 51 pct stake, ready to invest over $400 mln
* Fidelity buys more shares, ups stake to 6.8 pct in Satyam
* With 12 pct stake, L&T says not seeking management control
* Satyam shares rise 8 percent (Adds detail, Larsen quotes, share price, byline)
NEW DELHI, Jan 30 (Reuters) - The race to acquire Satyam Computer Services (SATY.BO), the outsourcing firm snared in India's biggest corporate scandal, heated up as diversified Spice Group offered to buy a 51 percent stake, joining other potential bidders.
Satyam (SAY.N) is struggling to survive after founder and chairman Ramalinga Raju quit this month, disclosing profits had been overstated for years. Since then, the government-appointed board has named bankers to identify strategic investors for the firm. [ID:nBOM358451]
Spice Chairman B.K. Modi said on Friday his group was keen to buy control of Satyam via new shares and pump in more than $400 million to help the struggling firm overcome a cash crunch.
"That's our desire," Modi told Reuters. "We want the money to go inside the company. For that they will have to make a preferential issue. If I buy shares from the market, the money will not go into the company."
Modi, whose group runs mobile software and handset makers, IT services and entertainment firms, is the first to indicate a value to a deal for Satyam, which counts General Electric (GE.N) and Nestle (NESN.VX) among its clients.
Shares in Satyam, whose market value has plunged to about $700 million from $7 billion in May 2008, ended 8.4 percent higher at 54 rupees on Friday.
Engineering conglomerate Larsen & Toubro, which also runs a smaller software firm, last week trebled its stake in Satyam to 12 percent, making it the largest shareholder, a move it said was to protect its interests.
Larsen is seen as the leading contender for Satyam and has not ruled out raising its holding to 15 percent -- a level which would trigger an open offer for a further 20 percent stake.
In a television interview, Larsen's Chief Financial Officer Y.M. Deosthalee denied a newspaper report it had written to the government expressing interest to take management control of Satyam.
U.S-based outsourcer IGate Corp (IGTE.O) has said it would be interested in buying Satyam with help from private equity funds.
Modi said Spice submitted its proposal of interest to Satyam's board on Thursday. "We have also talked to two, three board members informally."
Satyam's board said this week there was wide bidding interest for Satyam and named Goldman Sachs (GS.N) and another Indian investment bank to identify strategic investors.
Satyam said on Friday asset manager Fidelity Investments raised its holding to 6.8 percent in the firm -- potentially making it the second largest stakeholder -- exchange data showed.
On Wednesday, a Hyderabad court dismissed bail requests for Raju, his brother and former managing director Rama Raju, and former CFO Vadlamani Srinivas. They are currently being held in jail in the southern city of Hyderabad. ($1=49 rupees) (Additional reporting by Narayanan Somasundaram and Prashant Mehra in MUMBAI; Editing by Ranjit Gangadharan and Anshuman Daga)
