Satyam Computer Services, India's fourth-largest software services provider, today came under fire from institutional investors after the company announced its acquisition of two companies -- Maytas Infra and Maytas Properties--for $1.6 billion (around Rs 7,680 crore).
The Satyam scrip took a heavy beating in the US market, with its ADR falling almost 55 per cent at 11.30 pm. In New Delhi, Minister of Corporate Affairs Prem Chand Gupta said he will study the deal and examine the details.
The company's board had earlier in the day approved buying 51 per cent in Maytas Infra for $1.3 billion (around Rs 6,240 crore) and 100 per cent of Maytas Properties for $300 million (Rs 1,440 crore).
"The money will go to the promoters of Maytas Properties," Ramalinga Raju, Satyam's founder and chairman, said in a conference call. He said the acquisition proposal does not require shareholders' approval.
The sons of Ramalinga Raju sit on the boards of both these companies. Rama Raju Jr. is one of the key promoters of Maytas Properties, which develops urban infrastructure, and has been on its board since 2005.
The other son, B Teja Raju, is the vice-chairman of Maytas Infra, a 23-year old listed company engaged in infrastructure construction and asset development. The company employs over 3,000 people. For the second quarter ended September 30, 2008, the company registered a net profit of Rs 17 crore on a turnover of Rs 354 crore.
Satyam proposes to acquire 31 per cent in Maytas Infra from the promoters at a price of Rs 475 a share and make an open offer for an additional 20 per cent. The open offer price has been approved at Rs 525 a share and is subject to change according to the Takeover Code norms.
"The process should take around two-three months. We will then decide if my elder son should continue in the business or not. We, nevertheless, have enough professionals to run this business," Ramalinga Raju said.
