Sierra Optima parent seen zooming in on Indian arm

R Ravichandran

Hyderabad, Jan 4: The recent decision by the board of Sierra Optima Ltd (SOL) to delist the shares from NSE, BSE and HSE has heightened the chances of the US parent company and the main promoter Sierra Atlantic Inc to take control at the Indian outfit.

Sierra Atlantic’s interest in controlling Indian arm has become more visible following its approval to the Indian arm to buyback the shares.
Not only that, the parent company had lost the opportunity to increase its stake in the Indian company early this year, according to sources.

It may be recalled that the US parent company at the beginning of this year had shown interest in increasing the stake in Sierra Optima to 55 per cent from 26 per cent by investing in Optionally Convertible Debentures (OCDs), the sources said.

However, subsequently in March, Sierra Atlantic had decided to withdraw its proposed investment in Sierra Optima’s warrants citing reasons of US economy slowdown, rapid decline in financial markets, coupled with an increase in employee compensation at Sierra Optima, the sources said.

Despite terminating its business links with the Indian outfit, the US parent company may look at the relationship developed over the years and recognise business synergy between themselves and the work done by the Indian outfit, the sources claimed.

When contacted, Sierra Atlantic vice president Sanjay Khendry told The Financial Express that if the shareholders approved the buyback proposal, the US company would take the entire risk and burden of being the sole promoter and may like to carry the risk and move forward, he said. Not only that, given the reason and the current scenario Sierra Atlantic would prefer to continue its future business links with the Indian outfit rather than looking at varios options, he said. The US company has cited lack of business in the US, reduced bottomline and higher labour cost are the main reasons to delink the business activities with its Indian arm, he said adding there is a vast chance for both the companies to work out modalities to continue their business, he said.

Earlier, based on the advise from Ernst & Young, Sierra Optima board left with no option but to call for an EGM by this month-end to seek shareholders’ approval to delist the shares from the exchanges, Khendry said.

The board after taking the consent from the solicitors and advocates Amarchang & Mangaldas & Sresh A Shroff & Co, has decided to buyback 24,57,700 quity shares of Rs 10 each (74 per cent) at the rate of Rs 69.07 per share after subject to dividend distribution tax
liability of Rs 6.03 a share, Mr Khendry said.