The Hindu Business Line : Satyam backtracks, says it misread the possible impact

Hyderabad, Dec. 17 Satyam Computer Services has called off the $1.6-billion twin deals to acquire Maytas Properties and Maytas Infra, controlled by the sons of the company’s Chairman, Mr B. Ramalinga Raju.

It has also decided to put off all plans for further acquisitions or diversification for now.

The volte-face came within hours of a sharp fall in the price of company’s depository receipts listed on the New York Stock Exchange and strong resentment from investment community. Despite the retraction made well ahead of the start of trading in the domestic bourses the stock took a hammering on Wednesday ending 30.22 per cent lower at Rs 158.05. The ADR, however, recovered by 30 per cent at $7.46 ($5.7) during the initial hours of trading on the NYSE.

While admitting that the management had erred in not correctly anticipating the resentment of this magnitude, Satyam said that its first priority is to rebuild the investor confidence.

Calling off the deal in the early hours on Wednesday, Mr Ramalinga Raju said that the decision had been taken in light of the feedback received from the investors.

“We have been surprised by the market reaction to this decision even though we were quite positive about the merits of the acquisition,” Mr Raju said.

No diversification

“There will be no diversification or acquisition for now. We will take a call once the crisis is subsided. We will be talking to our investors in the next few days to rebuild confidence levels. How to win them back, that is our first task,” Mr Srinivas Vadlamani, Chief Financial Officer of Satyam, told Business Line. He, however, defended its move to acquire the infrastructure firms, reiterating the argument that it held good promise.

Asked further whether the opposition by investors would prove to be a deterrent in planning further acquisitions, Mr Srinivas replied in the negative. “People have not questioned the diversification per se. It is the family tie-ups between the companies that attracted opposition,” he said.

Mr Ram Mynampati, President echoed similar sentiment claiming. “We have misread the impact and maybe our judgment call was wrong,” he said.

Refusing to give revenue guidance for the remaining part of the fiscal, Mr Ram said the markets in general were witnessing reduced visibility. The quarter ended December in the US reflected reduced spending levels.

Though he hinted at continuation of depressed conditions, he refused to indicate figures.

Raju ‘upset’

Mr Ramalinga Raju, Founder-Chairman of Satyam, was an unhappy man.

“He is upset. He agrees that it is an unconventional move. But he feels that the investors would have seen a lot of increased shareholder value had they waited for some time,” Mr Srinivas said.

The Independent Directors on the board of Satyam were convinced that the company needed to think out of the box for growth in challenging times like now, said an Independent Director, who did not want to be identified.

They concurred that there was synergy between Satyam and the target companies. It was also felt that by using Satyam’s global brand, the infrastructure business could tap opportunities abroad in the long run, hence the unanimous view at the board meeting held on December 16.

“I am clear that we took a decision in the interest of the company and also agree with the management decision today to reverse it,” he added.

Related Stories:
Satyam to buy Maytas Infra, Maytas Properties for $1.6 b

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