HYDERABAD: Even as Satyam's deal to buy Maytas had to be hastily annulled in the wee hours of Wednesday morning as the company lost 52% on its ADR listed on the New York Stock Exchange (NYSE), a credibility crisis has begun to grip India's fouth largest IT company. "How can we trust the management of this company and its board of directors after it tried to enter into a deal that prime facie would benefit only the promoters who just own 8% of Satyam ? We have to examine whether the management needs to be changed," cried analysts in a reflection of the deep anguish caused by the now stymied move.
"We have decided not to move ahead with the acquisition in deference to the investment community's views," said Satyam in a SMS sent out at 3-45 am on Wednesday clearly shaken by the reaction on the US bourse of its move anounced barely 10 hours ago.
But this was clearly not enough to save the company: Satyam's stock tanked on the Indian bourses by 30%, even after the company announced its decision to go back on the deal. "The deal was seen as Satyam buying into companies owned by its family members. Cash from a company where the Raju family owns 8% was being transferred to a company where they hold more than 35%. This is what investors are resenting. Its become a corporate governance question. Whether the company can be trusted in future to take a proper decision is the moot issue," pointed out another analyst. Satyam's scrip closed at Rs 158.05 which is a 52 week low.
"58% of Satyam is owned by FIIs and they had no inkling that such a deal was in the works. There were questions about the future of Satyam after acquiring these companies when it doesn't have any experience in these businesses. It makes more sense to deploy your funds in related businesses or pay your investors," said Sourav Mahajan, analyst with Karvy.
Moreover, what irked investors was as to how Satyam decided to pay Rs 6,500 crore ($1.3 billion), just for Maytas Properties' assets, a land bank of 6,800 acres valued at almost Rs 1 crore per acre. "It is not easy to value real estate in this falling market. So there are questions on the valuation of the acquisition," said Monotosh Sinha, executive director of Centrum Capital.
Later in the day as the company started a firefighting exercise Satyam's chief financial officer (CFO), Srinivasa Vadlamani told TOI: "We never anticipated this reaction. We underestimated it. We thought we could manage it." He also indicated that the deal had been on the table for the last few months claiming that for starters many other companies were looked at for being acquired. But the choice fell on Maytas Properties because it was zero debt unlike other companies that were in the consideration zone.
"As for Maytas, it had cash on its books. So, it was a judgement call and sometimes some judgements do not turn out to be good," Ram Mynampati, president of Satyam and a board member tried to impress.
Source: http://timesofindia.indiatimes.com/
"We have decided not to move ahead with the acquisition in deference to the investment community's views," said Satyam in a SMS sent out at 3-45 am on Wednesday clearly shaken by the reaction on the US bourse of its move anounced barely 10 hours ago.
But this was clearly not enough to save the company: Satyam's stock tanked on the Indian bourses by 30%, even after the company announced its decision to go back on the deal. "The deal was seen as Satyam buying into companies owned by its family members. Cash from a company where the Raju family owns 8% was being transferred to a company where they hold more than 35%. This is what investors are resenting. Its become a corporate governance question. Whether the company can be trusted in future to take a proper decision is the moot issue," pointed out another analyst. Satyam's scrip closed at Rs 158.05 which is a 52 week low.
"58% of Satyam is owned by FIIs and they had no inkling that such a deal was in the works. There were questions about the future of Satyam after acquiring these companies when it doesn't have any experience in these businesses. It makes more sense to deploy your funds in related businesses or pay your investors," said Sourav Mahajan, analyst with Karvy.
Moreover, what irked investors was as to how Satyam decided to pay Rs 6,500 crore ($1.3 billion), just for Maytas Properties' assets, a land bank of 6,800 acres valued at almost Rs 1 crore per acre. "It is not easy to value real estate in this falling market. So there are questions on the valuation of the acquisition," said Monotosh Sinha, executive director of Centrum Capital.
Later in the day as the company started a firefighting exercise Satyam's chief financial officer (CFO), Srinivasa Vadlamani told TOI: "We never anticipated this reaction. We underestimated it. We thought we could manage it." He also indicated that the deal had been on the table for the last few months claiming that for starters many other companies were looked at for being acquired. But the choice fell on Maytas Properties because it was zero debt unlike other companies that were in the consideration zone.
"As for Maytas, it had cash on its books. So, it was a judgement call and sometimes some judgements do not turn out to be good," Ram Mynampati, president of Satyam and a board member tried to impress.
Source: http://timesofindia.indiatimes.com/
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