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Is Satyam averse to pursuing share buyback?

HYDERABAD: Will Satyam Computer Services go ahead with announcing buyback offer on January 10 when its board of directors meet? A strong feeling among large investors is that the company may not do so.

Speculation in the market is that the company itself is averse to announcing a buyback offer. Sources cite Chairman B. Ramalinga Raju’s announcement on December 27 that it had “decided to broaden the scope of its deliberations beyond a possible buy-back of its stock.”

If the company goes in for an open offer to buy back the shares, it will have to buy 10 per cent of the 67.34 crore shares. The paid-up share capital of the company is Rs. 134.69 crore. If the average price works out to Rs. 200, the company would have to exhaust a sum of Rs. 1,300-odd crore to buy the shares. This would enhance the shareholding of promoters and the paid-up equity would come down by Rs. 13.40 crore, but will the investors like to dilute the cash reserves is a big question. Of course, the company can choose the market purchase route and stop purchase “at a right time.”

Some analysts feel that large investors want to play safe. They don’t want to trigger an ‘open offer’ attracting the regulatory provisions by resorting to buy 15 per cent shares. Aside from this, most of them are not interested in management role.

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