The Hindu Business Line : Satyam mulls dilution of promoters’ stake

Mr Ramalinga Raju said DSP Merrill Lynch has been given the task of conducting a review of the company’s strategic options to enhance shareholder value.

Our Bureau

Hyderabad, Dec. 28 With pressure mounting on the management to take more action than just considering a share buyback, Satyam Computer Services has said that it is weighing options of diluting promoters’ stake.

It has also appointed DSP Merrill Lynch to review and suggest a plan to increase shareholder value in the backdrop of over 40 per cent erosion in the market capitalisation of the company in the last two weeks.

While announcing the decision to postpone the board meet (which was to be held on December 29) late in the evening on Saturday, Mr B. Ramalinga Raju, Founder-Chairman of Satyam Computer Services, said that the management is also considering to increase the size and alter the composition of the board, while effecting a change in the governance structure of the company.

independent directors

The role of independent directors in the company has come to the fore, with the board taking a unanimous decision on December 16 to invest $1.6 billion in the two companies controlled by Mr Ramalinga Raju’s family.

While the promoters stake in the company is 8.74 per cent, FIIs hold about 47 per cent.

It is not clear whether a strategic investor would step in.

The board meeting would now be held on January 10 to consider, what he called, additional options and to ensure physical participation by all the members and have an elaborate discussion on all the issues.

Serious questions

“The board recognised the serious nature of certain questions raised in the last two weeks. To ensure that these questions are properly addressed, and that the interests of stakeholders are fully and carefully considered, Satyam has decided to broaden the scope of its deliberations beyond a possible buyback of its stock,” he said.

Mr Ramalinga Raju said that DSP Merrill Lynch has been given the task of conducting a review of the company’s strategic options to enhance shareholder value. It would, then, suggest measures.

‘will reinforce trust’

“Satyam takes the interests of its stakeholders very seriously, and we will take whatever steps necessary to reinforce their trust and confidence in the company,” Mr Raju added.

Mr Satish, Joint Managing Director of Zen Securities, has said the moves announced by the company could stop the downside. “We cannot estimate the extent of the upside it could trigger unless the market has a clarity on the moves,” he said.