Satyam Puts 3% Infoway Private Offer On Hold

Satyam Computer Services has decided to put on hold its decision to offload a 3 per cent stake in Satyam Infoway. The company planned to retire its entire debt of around Rs 330 crore, by offloading the 3 per cent equity.

According to industry sources, the company was forced to withdraw its decision due to the fluctuation of prices in information technology stocks on both the Nasdaq and the domestic bourses.

The Satyam Infoway American depository share was down 5.75 per cent on the Nasdaq at 10 pm Indian Standard Time, trading at $41. It opened at $41-3/4 and lost $2-1/2 in early trade. About 4,37,900 shares changed hands in early trade.

 

Confirming the move, Satyam Computer vice-president (finance) V Srinivas said, "We have decided to put on hold the decision to offload a 3 per cent stake."

Earlier, the company had appointed leading investment banker Salomon Smith Barney to raise the money by diluting the 3 per cent stake.

Sources familiar with the deal said the Government of Singapore Investment Corporation and Unit Trust of India had agreed in principle to pick up equity in the company. While GSIC had agreed to pick up a stake of up to $50 million in the company, UTI had agreed to pump in $30 million.

However, GSIC's proposal was subject to UTI agreeing to pick up equity for investment reasons.

UTI proposed to pick up equity at a 30 per cent discount to the Nasdaq price, while Satyam Computer insisted on offering only a 15 to 20 per cent discount.

Srinivas said the company had received some offers from highly rated investors but declined to comment on individual proposals.

Sources said the deal got stuck after UTI withdrew from the commitment, which was reached amicably between the two parties after the Nasdaq prices crashed during the last few weeks.

Apart from Satyam Computer, CDS is the other major shareholder in Satyam Infoway with a holding of around 17 per cent. Sterling Computers holds around 2 per cent and the remaining equity is with the ADR holders.

At an analysts' meet in February, Satyam Computer's management had stated its intention of making the company debt-free.

Reacting to the withdrawal of the plan, industry analysts said the company would find it difficult to raise money at a reasonable price, given the depressed market conditions both in India and abroad.

However, an analyst said the company enjoyed higher evaluation on the bourses as it gave exposure to the Internet.

The valuation is expected to be driven by its subsidiary Satyam Online.

The company's strategy of going in for joint ventures and subsidiaries is expected to pay off in future. Last year Satyam Infoway had acquired IndiaWorld for Rs 499 crore.

Satyam Computer derives a major part of its revenue from software exports, with a major part coming from offshore services.