Wednesday, December 17, 2008

Satyam's wrong move

Satyam computers is part of Nifty and is one of India's top 5 IT companies !

What a mess they created on a peaceful Dec 16th evening ! They announced buyout of Maytas into Satyam at a price of 1.6billion.

Whats wrong in this?

Raju's are minority share holders of Satyam and Satyam is widely held by instituitions. They are also promoters of Maytas. This move seen as pumping cash into promoter's hands from Satyam ! Stock prices were hit mercilessly in US ADR and Satyam swiftly withdrew the move.

If Satyam has got hugh cash as reserves, why cant they declare high dividend or buy small IT companies? Why are they trying to pay themselves? Is Maytas starved of cash?

Who adviced on this great move and who decided in this mindless episode is something management should answer. It left a bad taste in corporate governance. Satyam has lost its credential and unlikely to recover for another two years !

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