Silverline defers acquisition, market takes the news in its stride

NetScribes/Ganesh Ramamoorthy

The high drama in the Silverline stock following the company's announcement that it will acquire a US-based software company, finally came to an end with the board deciding to defer its decision on the acquisition.

According to insiders, the acquisition fell through due to differences in opinion among board members, over the issue of an overseas acquisition. "The Board was divided on whether Silverline should acquire a company in the US or in Europe," says a company source. Despite attempts, no official comments could be obtained from the company on the issue.

However, the board's decision to invest $12.5-15 million for a 6 per cent stake in TIS Worldwide Inc (TIS) has been welcomed by the market. "There is not much damage to the scrip. Had the company decided to call off the deal totally instead of deferring it, things would have been different. The scrip would have lost at least Rs 100," says Arun Kejriwal, a Bombay Stock Exchange member. "But the strategic investment in TIS is a good move and has saved the scrip from any big damage," he adds.

TIS, a key player in IT consulting and e-business market, has operations spread over 10 offices across the US with over 600 software professionals. Its revenue for the year ended Dec 31, 1999 was US $104 million.

When the news hit the market on Tuesday morning, Silverline tumbled by about Rs 20.45 in early trade to the day's low of Rs 401.50 before recovering to a high of Rs 423.00. At close, the scrip was trading at Rs 421.10, down Rs 0.85 from the previous close of Rs 421.95 at the BSE. The scrip had clocked a total volume of 7.35 mn shares.

The Silverline board, which met on Monday has also approved the reservation of upto 1 million fresh equity shares of the company under ESOP for India-based employees and upto 1 million ADSs (each ADS representing 2 equity shares) under an ADR-linked stock option for employees of its subsidiary companies. The board has also decided to increase the authorised capital of the company to Rs 1 billion.

The Silverline scrip has been clocking huge volumes at both the BSE and the NSE for the last four days since the company announced its decision to acquire a US-based software company. At NSE, the scrip recorded a total volume of 46.5 million shares in the last four days, while at BSE it was 32.3 million shares.

On Monday, when the board was meeting to consider the acquisition proposal, the scrip had outshone heavyweights like Zee and Satyam in volumes. While 10.7 million shares changed hands in Silverline, 9.86 million shares of Zee Telefilms and 7.66 million shares of Satyam Computer were traded.

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