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Satyam shares may rise on better governance hopes

business Updated: Dec 29, 2008 09:44 IST
Satyam shares may rise on better governance hopes

Shares in Satyam Computer Services are expected to jump on Monday after the Indian outsourcer said it would consider more options to improve its business practices, including strengthening corporate governance.

New York-listed Satyam, India's No 4 software services exporter, has seen its shares plummet by about 40 per cent since a botched attempt two weeks ago to buy two infrastructure firms in which management held stakes.

On the weekend Satyam's board postponed a scheduled Monday meeting until January 10 to give itself more time to consider options to shore up investor confidence. The board had been expected to consider a share buyback, after news last week that the outsourcer had been barred from doing business with the World Bank added to its woes.

"Satyam stock could see a gain of about 7 to 8 per cent on Monday," said VK Sharma, head of research at Anagram Stock Broking.

"Investors were hoping for measures other than the buyback to boost sentiment. Any news that gives the indication that the current board and the management will be changed is positive for investors," he said.

The Mint newspaper on Monday quoted US-based independent director Vinod Dham as saying the January board meeting would discuss a change in management, including the possible exit of Chairman B Ramalinga Raju. It would also discuss appointing a chief executive or even a sale to another entity, the paper said.

"There are some issues that I know of, but there are some others that I am not aware," Dham, known as the father of the Pentium chip, was quoted as saying.

A Satyam spokeswoman told the paper Dham's comment was "all conjecture till the board takes a decision". Company officials could not be immediately reached for comment.

The company said on Saturday its board would consider moves to strengthen the firm's governance structure, including increasing the size and altering the composition of the board. It also said it had hired DSP Merrill Lynch to review the company's "strategic options" to enhance shareholder value, but did not give further details.

The meeting would also address issues arising from a possible dilution of the founder's stake in the company, which specialises in business software and offers back-office services.

The World Bank said last week 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 and to issue an apology, but the World Bank in Washington has said it stood by its statement.