Bangalore: Satyam Computer Services Ltd said in a separate statement on Sunday that the stake in the company held by promoters, or certain insiders, may have been diluted after routine actions by the promoters’ institutional lenders, who may exercise or may already have exercised their option to liquidate shares at their discretion to cover margin calls.
It had also hired DSP Merrill Lynch to conduct a review of the company’s “strategic options” to enhance shareholder value, it said without giving details.
Satyam postponed this week’s board meeting until 10 January to give itself time to consider a series of options to shore up investor confidence, including steps to strengthen governance.
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.
The board was due to meet on Monday to consider a share buyback, but news last week that the outsourcer had been barred from doing business with the World Bank added to its woes.
New York-listed Satyam, India’s No. 4 software services exporter, has seen its shares plummet by about 40% since a botched attempt two weeks ago to buy two infrastructure firms in which management held stakes.
“The damage has already been done, but the company is clearly focusing on all confidence-building options to improve its image in the market,” said RK Gupta, managing director of Taurus Mutual Fund, which holds Satyam shares in its portfolio.
“There is huge pressure on Satyam to improve its corporate governance norms.”
The Hyderabad-based company said in a statement issued late on Saturday night its board would consider measures to strengthen the firm’s governance structure, including increasing the size and altering the composition of the board.
“Satyam’s Board of Directors recognizes the serious nature of certain questions raised by the events of the last two weeks,” its chairman B Ramalinga Raju said in the statement.
“In order to ensure that these questions are properly addressed, and that the interests of stakeholders are fully and carefully considered, Satyam has decided to broaden the scope of its deliberations beyond a possible buy-back of its stock.”
Gupta at Taurus said the proposal should be positive for Satyam shares when the market opens on Monday.
The shares, which hit a five-year low last week, gained 0.4% on Friday to Rs135.50 as investors speculated the board would set a higher price for the proposed share buyback. The stock closed up 3.8% at $7.92 in New York.
“If, as part of the options, the current board and management is changed then it will be positive for the investors,” Gupta said.
Satyam’s promoters, headed by its chairman, held 8.74% in Satyam as on 31 March, 2008, while institutional investors owned 61 percent of the company, according to information available on its website.
“Satyam takes the interests of its stakeholders very seriously, and we will take whatever steps are necessary to reinforce their trust and confidence in the company,” Raju said.
The firm said on 16 December it would pay $1.6 billion for Maytas Properties Ltd and Maytas Infra, founded by Raju and his sons, but the plan was dropped within hours after its shares traded in New York lost more than half their value.
The company, which has a market value of $1.9 billion, then said it would consider a share buyback, which analysts said was a way to placate angry investors, but its shares fell again after news it had been barred from doing business with the World Bank.
The World Bank said last Tuesday Satyam had been declared ineligible for direct contracts with it for eight years “for providing improper benefits to Bank staff and for failing to maintain documentation to support fees charged for its subcontractors.”
Satyam has asked the authority to withdraw what it called “inappropriate” statements about the company and to issue an apology, but a spokesman for the World Bank in Washington has said it stood by its statement.
In the latest twist, an independent director resigned from the firm late last week. The company gave no reason for the decision.