Satyam Buckles Under Investor Pressure : Calls Off Maytas Deal
Satyam Chairman B Ramalinga Raju had to retract his steps after a 55% drop in its ADR in NYSE in US, a loss that was directionally against the rally on US brouses forced Satyam to call off its acquisition of Maytas properties and Maytas infrastructure. The deal was worth US$ 1.6 Billion and was dubbed by investors as plagued with conflict of interest in these times when the companies requires all the reserves to shore off the Economic Gloom. Raju holds stake in both the companies.
The Aftarmath of the Botched Deal
Satyam investors on New York Stock Exchange lost US$ 2 billion in just over sixty minutes. However the entire loss was recovered after the deal was called off. As the deal was announced after the closure of Indian Stock Markets and the effect is visible in Satyam today with the script losing 25% in early trade.
Satyam (NYSE: SAY) is number 4 IT company in India and operates in 65 countries across the globe and claims 52,865 associates and has a customer base of 690 companies, including 185 fortune 500 companies. 62% of its US$ 2,465.70 million revenues come from US of A and the company is headquartered in Hyderabad, India.
Maytas is Satyam spelled in reverse and was probably floated to cash in on the property boom that engulfed India for the past couple of years.
As per the half yearly reports of Maytas submitted to the Indian Stock Exchanges in October 2008 it had a half yearly turnover of INR bn 73.8 with a net profit of INR 3.7 billion amounting to 5% of the turnover. The annual report of Maytas (financial year 2007) refers to its vision as "To enhance the Quality of Life by Creating World Class Infrastructure". Now the question investors are asking is Whose Quality of Life?
Satyam calls off $1.6bn deal to buy construction companies
NEW YORK/BOSTON: India's Satyam Computer Services Ltd bowed to investor pressure and cancelled plans to spend $1.6 billion to buy two builders,
killing the deals just 12 hours after they were announced.
The quick change in plans, which was announced late on Tuesday, came after investors demonstrated their opposition to the deals by pushing shares in India's No. 4 software services company down 55 percent in New York Stock Exchange trade.
Tuesday's unusual turn of events began after the close of India's stock markets when Satyam said it planned to enter the depressed construction industry by buying all of privately held Maytas Properties for $1.3 billion and 51 percent of builder Maytas Infra for $300 million.