Under pressure from furious institutional investors, Satyam’s plan to acquire Maytas Infra and the unlisted Maytas Properties for $1.6 billion could end up with the Satyam board being changed.
“We (institutional investors) are the biggest stakeholders and are concerned about the corporate governance standards,” said a top official of public sector fund, on condition of anonymity. “We will sit together and take a call on the board and find out a way ahead.” He did not rule out the possibility of the board being sacked. “Even though the deal has been cancelled we would like to know why did they go ahead at all,” he said.
Market players say the deal was made only to benefit promoters. “They are paying $1.3 billion for a company held completely by promoters,” said a fund manager with a large-sized mutual fund house. “While promoters hold less than 9 per cent stake in Satyam, they are putting at risk the wealth of 91 per cent of minority shareholders.”
Management credibility is the other casualty. “Clearly, the intent of the management seems towards misusing cash,” said Gaurav Dua, head of research, Sharekhan.
The Satyam stock fell 30 per cent in Wednesday’s trading on the BSE, while it had fallen by 55 per cent on the Nasdaq on Tuesday. “The share prices will remain under pressure for sometime,” said Dua.
Several mutual funds houses through their schemes have big investments in Satyam and their net asset values will take a hit. As on October 2008, HDFC Asset Management Company had investments of Rs 244 crore in Saytam through its various schemes. Similarly UTI has investments of Rs 241 crore in Satyam, while Birla Sunlife AMC holds Rs 80 crore worth of the stock.
Investors are questioning the role of the five independent directors who cleared the deal unanimously. Vinod Dham, M Rammohan Rao, VP Rama Rao, Mangalam Srinivasan and VS Raju are the five independent directors at Satyam.
“We could even see a change in the board,” said Dua.
Clearly, the Satyam saga has only begun.