Added Jagannadham Thunuguntla, head of the capital markets arm and director of India’s fourth largest share brokerage firm, the Delhi-based SMC Group: “Promoters showing such disregard for ethics and corporate governance could tarnish the reputation of family-owned businesses in India. “A lot of foreign institutional investors (FIIs) will be wary of investing in such companies and we already saw a lot of FIIs exiting the stock. The news has left a bad taste in the mouth.”

1. Thursday, December 18, 2008
Investors wary of Satyam’s volte-face on Maytas
Bangalore/Mumbai/Hyderabad/New Delhi, Dec 17 (IANS) Satyam Computers’ bid to buy out
Maytas Properties and Maytas Infra has not gone down well with analysts, industry trackers and
investors.”Though Satyam attempted to wriggle out of an ill-fated decision, the damage has been
done to its credibility, as evident from the hammering its scrip took on the bourses, especially on
the New York Stock Exchange on Tuesday,” leading brokerage Sharekhan analyst Gurudev Dua
told IANS.
The software exporter Wednesday morning withdrew its plans to acquire Maytas Properties and
take majority stake (51 percent) in Maytas Infra - both managed by the two sons of Satyam
founder-chairman B. Ramalinga Raju - for $1.6 billion (Rs.79.2 billion).
Minutes before trading began on the Bombay Stock Exchange (BSE), the company announced it
would not to go ahead with the acquisition in the light of feedback received from investors.
“We have been surprised by market reaction to this decision even though we were quite positive
about the merits of the acquisition. However, in deference to the views expressed by many
investors, we have decided to call off these acquisitions,” Raju said in a notification to the stock
exchanges.
Satyam’s stock was hammered on the bourses, with over 33 million shares changing hands
Wednesday, and the scrip shedding over 30 percent or Rs.68.45 to close at Rs.158.05. The
Maytas scrip, which was trading above the Rs.500-level since last week, fell 20 percent
Wednesday to close at Rs.388.25.
“In the interim term, Satyam’s stock price will be under pressure and investors will be wary of
either retaining or buying its shares, with the management’s corporate governance and credibility
being questioned,” Dua said.
Added Jagannadham Thunuguntla, head of the capital markets arm and director of India’s
fourth largest share brokerage firm, the Delhi-based SMC Group: “Promoters showing such
disregard for ethics and corporate governance could tarnish the reputation of family-owned
businesses in India.
“A lot of foreign institutional investors (FIIs) will be wary of investing in such companies and
we already saw a lot of FIIs exiting the stock. The news has left a bad taste in the mouth.”

2. Even after Satyam retreated, analysts said the move had rattled the confidence of investors and
raised concerns on how the company would manage its cash reserves of around Rs.53 billion.
“As investors saw it, (the move was) to bail out the realty firms and benefit the promoters more
than the company or its shareholders,” said leading technology magazine CyberMedia editor
Prasanto K. Roy.
Similarly, Kaustubh Dhavse, deputy director at consulting agency Frost and Sullivan, questioned
Satyam’s decision. “In the absence of explanation and transparency in the decision, investors are
at a loss to know the primary objective or motive behind the bid.”
Maytas Properties is run by Rama Raju, the younger son of the Satyam founder, and Maytas
Infra by Teja Raju, the elder son.
Maytas Properties, an unlisted company, is building IT Special Economic Zones (SEZs) and
integrated townships in Hyderabad. It has a land bank of 6,800 acres including 500 acres in
Hyderabad.
Maytas Infra, listed last year, is into power, roads, ports and airports. It recently bagged the
Rs.121-billion Hyderabad metro rail project.
Since the company is not in a position to raise such huge capital, some analysts feel the deal was
to ensure the project is executed with the help of Satyam’s huge cash reserves.
The representative body of the Indian software services industry, Nasscom, declined to comment
on the development.
“We don’t keep a track of what software firms do in individual capacity. We do not study the
implications of a particular decision not related to technology but to investors,” Nasscom
president Som Mittal told IANS.