Investors expect key changes in Satyam board

ADRs jump 3.8% as market expects image-boosters.

The decision of Satyam Computer Services to give itself time to consider a series of options to shore up investor confidence, including steps to strengthen governance, has come as a welcome surprise to institutional investors in the company.

Many feel the damage has already been done, but this is better than a knee-jerk reaction like share buyback. It shows that the board is serious this time about some concrete steps to salvage the company’s reputation.

The US markets welcomed the board’s decision to go beyond just a buyback of its shares. The stock closed up 3.8 per cent at $7.92 in New York. In the domestic market, Satyam has seen its shares plummet by about 40 per cent since a botched attempt two weeks ago to buy promoter-related two infrastructure firms.

Ajay Garg, managing director of Equirus Capital, said the company is clearly trying to clear the mess. "The buyback option was seen as something that the management had announced in haste. It seems Satyam will take some concrete steps to improve its image,” he said.

While announcing its decision to postpone its board meeting to January 10, Satyam had on Saturday night said that its board would consider measures to strengthen the firm's governance structure, including increasing the size and altering the composition of the board.

The meeting would also address issues arising from a possible dilution of the promoter's stake in the company, which specialises in business software and offers back-office services.

Bankers and analysts, who are still critical of the role played by the independent directors and Satyam Chairman Ramalinga Raju, said it would be good if some credible names join the board in the reshuffle.

Another analyst of a leading brokerage said cosmetic measures won’t do as institutional investors have lost faith in the company and they are interested in getting the top management changed. While that seems unlikely, at least a few credible names will stem the rot somewhat, he said.

Some analysts felt that the company could also be thinking of bringing in a strategic investor. An investment banker from a leading bank said the appointment of DSP Merrill Lynch -- an investment bank rather than a consulting firm -- shows the company could be in the midst of locating a suitable investor.

The investment banker, however, feels getting a strategic investor at a good price will be a tough task in the current environment. Private equity players are not too keen to invest at a time when the recent World Bank incident has tarnished the company’s image.

Amid speculation that there could be major changes in the management and that Chairman B Ramalinga Raju may quit over the controversy on acquisition of two firms promoted by his family, one independent director V S Raju today came out in support of the present regime.

"I am not looking for a change in management," V S Raju told PTI on phone from Hyderabad. Satyam's promoters, headed by its chairman, hold 8.74 per cent in Satyam as on March 31, 2008, while institutional investors owned 61 per cent of the company, according to information available on its website.