Even eights months after taking over the beleagured Satyam Computer Services, Tech Mahindra does not seem to have instilled the confidence of institutional investors in the firm. This is evident by the continuance of the exodus of foreign institutional investors (FIIs) from the company, which first began on a large-scale last year post-December 16 when the controversial decision was taken by Satyam?s disgraced founder Ramalinga Raju to acquire the two Maytas firms held by his family.
The FII stake in Satyam, which was at a high of 46.8% in September 2008, slid to 12.5% this Septmeber, according to data available with the stock exchanges.
With FIIs exiting, the shareholding equation of Satyam has more or less reversed as retail investors now control around 30% of the company against the earlier 10% with small retail investors (shares up to Rs 1 lakh) holding around 16% stake in the company, leaving them susceptible to a high amount of risk.
Most FIIs such as Aberdeen Asset Managers and Lazard Asset Management among others and like Fidelity and JP Morgan that held significant stake in the company and had exited soon after the scam broke or subsequently, have not returned. FII stake touched a low of 4.5% at the end of June .
In fact, an FE analysis of data from the stock exchanges and Bloomberg reveals that current FII holding in the company is in small chunks and scattered between various players (see table) with none of them holding a stake of more than 1% in the company with the exception of one.
Equity analysts with brokerage firms that FE spoke to said that despite the quick damage control by the Central government and the subsequent takeover by Tech Mahindra, there continues to be visible amount of risk in the company.
?Moreover, the delay in reporting the financials is also acting as major deterrent in the way of investments which can be termed as strategic,? said an equity analyst.
According to the latest data, post-September major investors in the company include India-based Mutual Fund Sundaram Newton (which acquired shares around 0.34% in Satyam), affiliate of Commonwealth Bank of Australia ? First State Investment (which has around 4.42% stake in the company) and Barclays Global Investments (0.11% stake). JM Capital Management and Allianz Netherland have completely liquidated their holdings in the company.
To an email query, First State said that the company holds around 2.05% in Satyam through First State Indian Subcontinent Fund (onshore) and 2.37% through First State Indian Subcontinent Fund (offshore), as of November 31, 2009. ?Neither figure is especially significant considering the allocations to individual companies in our top 10 holdings,? it said. It refused to divulge the strategy behind such huge investment in one single company.
The high percentage of the retail investors, especially smaller retail investors has made the stock highly liquid.
?Satyam is a wholly liquid stock, with huge trading volumes and high amount of risk considering the fact several things about the company are not yet known and such significant chunk of the company?s stock is with small retail investors,? said an analyst.
