In a bid to salvage the damage to its reputation over the last few days, IT services provider Satyam Computer Services is also thinking of a higher dividend payout to investors.
If implemented, this will be music to the ears of shareholders and analysts who have been insisting that Satyam would be better off returning money to shareholders. On Wednesday, Satyam reversed a decision taken late Tuesday to spend $1.6 billion (roughly Rs 8,000 crore) to acquire two firms owned by the promoters after strong shareholder protests.
The company has already said its board will meet December 29 to consider a share buyback (its first, if approved). The announcement of the buyback received lukewarm response from the markets. The stock closed almost 4 per cent down to touch Rs 162.80 on the Bombay Stock Exchange.
Satyam currently has around Rs 5,500 crore in cash and equivalents. It has never given a special dividend till date. It has, however, been paying a 175 per cent dividend on expanded capital (including bonus shares) for the last three years. Satyam's dividends are smaller, though, than those offered by Infosys (which also gave a special dividend in 2004) and Wipro.
"We have always been sensitive and will continue to remain sensitive to the needs of the market. The very fact that we have decided not to go ahead with the decision has been seen as a 'welcome move' and a 'positive decision' by the investing community. We are considering other options, including a buyback or a higher dividend," Satyam Chairman B Ramalinga Raju told Business Standard. "We believe these moves will help reinstate lost ground," he added.
If Satyam gives this special dividend, foreign institutional investors (FIIs) with nearly 47 per cent stand to gain the most. Next come ADR holders with 19.4 per cent stake, followed by the insurance companies (9 per cent), promoters (8.61 per cent), and mutual funds (5.68 per cent).
Meanwhile, responding to the allegations of failure on the corporate governance front, Raju countered: "The thought was to further de-risk the business in the current economic downturn adding value to our stakeholders and explore additional sources of revenue for Satyam. However, the issue has snowballed because the companies for acquisition belonged to related parties. Had it not been so, there would probably not have been as much resistance."
Raju said the company had "faith that the infrastructure sector would grow fast after the recession was over", and the two acquisitions were to pave the way for accelerated growth in additional geographies and markets such as transport, energy and several infrastructure sectors for the core IT business.
Asked which other companies the board evaluated before selecting Maytas Properties and Maytas Infra, Raju insisted that "we felt that Maytas was the most appropriate option, given the similarity within the two companies in terms of processes, approach and leadership style".
On whether the company had lost its "intent and focus" when it came to IT, Raju said, "We have always maintained we will continue to be focused on IT. Satyam has forged long and lasting relationships with its customers and we don't believe that this 'investment related perception' would have an impact on our ability to service their needs."
Sebi to study case: Bhave
Securities and Exchange Board of India (Sebi) Chairman CB Bhave today said the regulator needs to study the details of the failed Satyam-Maytas deal and it would be too premature to react on the issue right now. He was speaking on the sidelines of a conference on securities markets organised by the National Institute of Securities Markets (NISM) in Mumbai.
Meanwhile, Minister of Corporate Affairs Prem Chand Gupta said yesterday that they first need to get Satyam's feedback and would examine possible violations after that.
