Mumbai, Dec. 16: Satyam Computer Services stunned the markets and analysts today with an audacious $1.6-billion (around Rs 7,680 crore) acquisition of Maytas Properties and Maytas Infra Ltd — two companies owned by the Rajus, who also control the countrys fourth largest software maker.
The deal outraged minority shareholders of the Rs 8,473.5-crore Satyam Computer. Fund houses such as SBI Mutual Fund, Anil Ambani-owned Reliance Mutual Fund and Templeton Mutual Fund protested against inflated valuations and violations of corporate governance standards.
Templeton said it would go all out to scuttle the deal.
The two Maytas entities have also been founded by the family of B. Ramalinga Raju, who is the chairman of Satyam Computer.
Under the terms of the deal, Satyam will pay $1.3 billion for a 100 per cent stake in Maytas Properties, an unlisted company. Maytas Properties — which is entirely owned by the family and close associates of the Rajus — has a land bank of 6,800 acres principally in Chennai, Hyderabad, Visakhapatnam and Nagpur.
Analysts said the deal was overpriced as it valued the company almost on a par with Unitech, the countrys second largest real estate developer.
Satyam will also acquire a 51 per cent controlling stake in Maytas Infra for $300 million. This is a listed company in which the Rajus hold a 36.64 per cent stake. Maytas Infra reported a net profit of Rs 99.64 crore on a total income of Rs 1,670.15 crore in the year ended March 31.
B. Ramalinga Rajus two sons — Teja B. Raju and Rama Raju — are also actively involved in the two Maytas companies.
Satyam will acquire 31 per cent from the promoters of Maytas Infra and make an open offer for an additional 20 per cent from the public. Satyam proposes to pay a price of Rs 475 per share to the promoters of the company. However, the price for the open offer has been fixed at Rs 525 per share.
Though the Satyam promoters hold only 8.61 per cent in the countrys fourth largest software maker, they do not plan to seek shareholders approval for todays buyout.
Brokerage CLSA said the deal would probably go down as one of the worst corporate governance events in India. We are moving our rating (on Satyam Computer) from under-perform to sell. We consider this a major corporate governance issue. We see eroding focus, business momentum and market credibility ahead, it said.
The American Depositary Receipts of Satyam Computer slumped 53.31 per cent to $5.86 after the announcement. The stock is likely to be battered tomorrow when the bourses open for trading.
Analysts were intrigued by the decision of Satyam to diversify into an area such as construction that is going through a very difficult phase.
Many reckon that information technology companies are also going through a challenging phase and need to conserve their resources.
Analysts said the deal would almost wipe out all the cash on the books of Satyam Computer. At the same time, its debts could rise.
The senior management of Satyam was grilled at a conference call after the deal was announced. However, they refused to say which firm had valued the companies before the deal was struck, except to say that it was one of the Big Four.
Many Satyam investors are not amused by the promoters reluctance to seek shareholders approval for the stake acquisition.
The minority shareholders wealth will be affected by the decision. Over $1 billion will flow to the promoters. It is not in the interest of the company to diversify into an unrelated business. This decision must have the consent of all the shareholders, one angry shareholder told Ramalinga Raju at the conference call.
Raju defended the proposed acquisition, saying that it would give the company access to assets and add significant value. I believe it is a good judgement call. We are excited. It will create enormous value, he said.
The government today said it would look into the Satyam deal if there was a violation of the companies act.
We do not know the facts of the deal right now. But certainly if there is a violation of the companies act, we are going to look into it, corporate affairs minister P.C. Gupta told PTI in New Delhi.