Hit by the adverse market reaction, homegrown Satyam Computers on Wednesday called off its proposed $1.6-billion acquisition of two companies promoted by the IT major Chief Ramalinga Raju's son.
Announcing the decision to call off the acquisition of Maytas Properties and Maytas Infrastructure "in light of the setback received from the investors community," Raju said: "We have been surprised by the 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," he said.
On Tuesday, the company's board approved to invest $1.6 billion in Maytas Infra and Maytab Properties.
Following which, the ADR took a hard knock and slumped 54.5% to 5.70 despite a strong rally in the US markets.
The reversal comes within a day of the Satyam board approving the decision to acquire Maytas Properties for $1.3 billion and a majority 51 per cent stake in Maytas Infrastructure for $300 million.
Shortly after the announcement was made last evening, the US-listed company had plummeted more than 55 per cent on the American bourses reflecting rejection of the deal by the shareholders.
Even during the investors conference held after the board's approval for acquisition, Raju faced tough questions from Institutional Investors in Satyam such as Reliance Mutual Fund, SBI Mutual Fund, Templeton Mutual Fund and CLSA, with some of them even threatening to oppose the deal.
Satyam nosedives in early trade, tanks 33%
Satyam Computer tanked as much as 33 per cent and witnessed its 52-week-low level on bourses in early morning trade amid the company calling off its $1.6-billion deal to acquire two infrastructure businesses promoted by the IT major Chief Ramalinga Raju's son.
Satyam today opened at Rs 200, a fall of nearly 12 per cent in the early trade on the Bombay Stock Exchange. The scrip lost further ground and tanked as much as 30.75 per cent to touch an intra-day low of Rs 156.85.
Similar trend was witnessed on the National Stock Exchange where the scrip opened on a weak note at Rs 214.90, then dipped further to witness an intra-day low of Rs 151, a fall of 33.35 per cent from its previous closing price.
"By announcing such a deal, which was wiping off the entire cash in the balance sheet, the management has given a bad impression," Ashika Stock Brokers Research Head Paras Bothra said.
The fall in the share price today is more of a sentimental impact and the announced deal would have a lasting impression on the institutional investors, who would continue their sell-off in the short term, Bothra added.