Satyam dangles buy-back plan scrambling to undo damage

Satyam dangles buy-back plan scrambling to undo damage

Hyderabad: Desperately trying to recover from the financial fallout of a failed acquisition proposal,Satyam Computer Services Ltd said its board will meet on 29 December to consider a proposal to buy back shares.

The news helped Satyam’s shares recover slightly from Wednesday’s debacle. On the Bombay Stock Exchange, shares of Satyam gained 7.2% to close at Rs169.35 on Thursday.

On Tuesday night, Satyam’s US-listed shares had at one point plunged 53% hours after the company unveiled a much reviled $1.6 billion (Rs7,568 crore) plan to acquire two infrastructure companies, floated by sons of Satyam chairman B. Ramalinga Raju.

And even though a stunned Satyam management abruptly called off the deal within hours amid protests from major investors, Indian shareholders punished its India-listed shares, pushing them down by 30% by end of trading, wiping out nearly $1 billion in shareholder wealth.

“Based on input from our shareholders and investors, we decided to call off the Satyam-Maytas acquisition. Satyam has called this (29 December) board meeting to consider the proposal for buy-back of shares," said Srinivas Vadlamani, chief financial officer of Satyam.

Satyam declined to elaborate on the buy-back proposal.

“The impact is going to be mixed, given the negative trend that the Satyam stock has seen in the last two days. There were also expectations of special dividends," said Hardik Shah, a research analyst with the Mumbai-based brokerage Asit C Mehta Investment Intermediates Ltd.

In a research note to its clients on Wednesday, Abhiram Eleswarapu and Avinash Singh of BNP Paribas Securities India Pvt. Ltd said that Satyam “should consider paying a special dividend this year. We believe the announcement of an increased dividend will put to rest investor concerns that Satyam’s cash is at risk."

Common routes through which the company can execute a buy-back of shares are a tender offer or an open market purchase at existing price. In a tender offer, the company comes out with an offer requesting shareholders to submit, or tender, a portion or all of their shares within a certain time frame.

Normally, a tender offer will also stipulate the number of shares that the company is interested in repurchasing and the price range that the company is willing to pay, usually more than the existing market price. Those details are expected to be available after the board meeting on 29 December.

When shareholders take up the offer, they can state the number of shares they want to tender along with the price they are willing to accept. Once the company has received all such offers, it will decide on the price at which to buy back.

Meanwhile, some of Satyam’s independent directors continued to insist that the proposal to buy Maytas Properties Pvt. Ltd and Maytas Infra Ltd was good for Satyam and that it was only abandoned because of shareholder unrest.