Satyam sells entire Sify stake for $62.6mn

Raju Vegesna of Infinity Capital Ventures to take over as Sify chairman.

Satyam Computer Services sold its entire 31.6 per cent stake in Sify to Infinity Capital Ventures LP, a company controlled by Silicon Valley entrepreneur Raju Vegesna, for $62.6 million (Rs 286.27 crore).

In a separate Rs 172.1-crore ($37 million) million transaction, Infinity Capital has also agreed to buy directly from Sify approximately 6.7 million newly issued shares at a purchase price of Rs 256.09 (about $5.60) a share in cash. This deal is expected to be completed by the end of 2005 after receiving shareholder and regulatory approvals.

Infinity Capital will hold 40 per cent of Sify after the transaction. Vegesna will take over as Sify chairman and will nominate another person to the company's board of directors.

With this transaction, Satyam has ceased to be a Sify shareholder, a company it had formed in December 1995 to foray into allied businesses and to create long-term business and investment value. Against its original investment of $5 million in Sify in 1995, the company has received a gross consideration of about $117 million till date, making it a highly successful and value-creating investment for its shareholders.

"The move will enable Satyam to further focus on its core business and unlock the value of its investment. Leveraging Satyam's brand and committed support, Sify has emerged as a strong player in the data and network space in India. I am sure that Sify's management will continue to scale up Sify's growth with active support of the new investor," Satyam Chairman B Ramalinga Raju stated in a press release today.

The sale of shares to Infinity Capital has been concluded at a price of $5.60 an ADS.

The ADSs are priced at a premium of about 7.5 per cent over one month's daily average price as quoted on the Nasdaq, where Sify's ADSs are listed and traded.

DSP Merrill Lynch was the adviser to the company on the ADS sale, while ICICI Securities was the arranger of Sify's sponsored ADS programme.

'Sify's existing core businesses provide a strong platform for future growth, both organically and through possible acquisitions -- growth that I hope will help enable, among other things, the infusion of Rs 1721 million in new capital, strategic inputs and assistance in developing alliances with other innovators in this space. Among other things, these contributions should help Sify leverage its expertise and experience for new business opportunities by supporting the company's efforts to expand its international operations,' said Vegesna.

'We look forward to working closely with Raju Vegesna to build on Sify's track record of growth, quality standards and innovative services, and to continue to lead the market in India and abroad,' R Ramaraj, managing director & CEO of Sify Ltd said.

Sify has zero debt on its books and its cash-in-hand is about Rs 286.3 crore (about $62 million) post infusion. With this additional investment of Rs 172.1 crore, Sify's equity base will expand to 44.8 million shares on a fully diluted basis, including stock options.