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| Satyam loses 3 more directors | |
| BS Reporter / Hyderabad December 30, 2008, 0:46 IST | |
Satyam’s cup of woes is brimming over, with three more independent directors resigning today, which has brought down the board strength to 6 from 10.
Their resignations follow widespread criticism of their role after Satyam called off a deal, announced mid-December, to invest approximately Rs 8,000 crore ($1.6 billion) in two promoter-owned companies Maytas Infra and Maytas Properties. The proposals were scrapped following strong protests from institutional shareholders.
Mangalam Srinivasan was first independent director to resign on December 25 owning moral responsibility. She was joined today by Krishna G Palepu, Vinod K Dham and M Rammohan Rao.
This means Satyam is now left with only two independent directors — T R Prasad and V S Raju. The four executive directors are B Ramalinga Raju, founder and chairman; B Rama Raju, managing director; Ram Mynampati, president; and V Srinivas, chief financial officer. None of the directors who resigned today were available for comment. Rao, who is the dean of the Indian School of Business, and Palepu have been quiet throughout, Dham has been talking about asking for all relevant information from the management.
Analysts, however, feel the board meeting, rescheduled last week from today to January 10, would lose some credibility with the resignation of the independent directors. It is believed that after the World Bank announced that it had banned Satyam from doing any offshore work with it for eight years on allegations of data theft, some senior company executives were planning to approach the independent directors with a proposal to set up a management committee that would have a big say in running the company. With the resignation of four of the six independent directors, that plan can’t go through now.
Despite this, Satyam’s shares rose 9.4 per cent on Monday to Rs 148.25 on the Bombay Stock Exchange (Rs 135.5 on Friday), after the fourth-largest Indian software service provider stated it would consider more options to improve shareholder value and strengthen corporate governance.
Commenting on the resignation of Dham and Palepu, B Ramalinga Raju merely said: “We would like to thank them for their valuable contributions while serving our board.”
He added reconstituting the board would be an important item to be discussed at the board meeting on January 10, 2009.
Analysts, however, feel that the independent directors on Satyam’s board have received substantial criticism for their inability to question the rationale of the proposal for Satyam to acquire 100 per cent in Maytas Properties and 51 per cent in Maytas Infra. In the process, questions have been raised on discharging of their fiduciary obligations.
In a report to its investors on Monday, CLSA, a brokerage house covering the Asia-Pacific markets, said: “The over $250,000 consulting fees given by Satyam to one of the directors — Krishna Palepu — has raised issues of his independence. We believe that the exit of the Raju family from day-to-day management of Satyam and the induction of a strategic investor would all need to happen.”
Bloomberg adds: Satyam’s biggest outside shareholder, Aberdeen Asset Management, said quite a few things have made the investor community very sceptical about the senior management’s intentions. “They need to work hard and quickly to rebuild their reputation,” it said.
Investment banking sources said, General Atlantic, which has a stake in Hexaware and a few other IT services companies, may look at picking up 15 per cent stake in Satyam for around $300 million, based on the current market price.
Funds run by Aberdeen own 6.6 per cent of Satyam, making Scotland’s largest independent money manager the Indian company’s second-largest investor after Chairman Ramalinga Raju’s family, according to data compiled by Bloomberg until the end of October. Fidelity Investments is the second-largest institutional investor with about 5.7 per cent.
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