Investors on Wednesday reacted sharply to Satyam Computer Services stocks after the company on Tuesday evening announced plans to buy Maytas Properties for $1.3 billion and 51% stake in Maytas Infrastructure for $300 million. Foreign funds liquidated their positions in the Satyam stock, in which FII holding stands at more than 45%.
Stocks of Satyam Computer Services fell 68.45 points closing at 158.05, which was a 30.22% drop from Tuesday?s close. Hit by the adverse market reaction, Satyam called off the proposed $1.6-billion acquisition of two companies promoted by the fourth largest IT company chief Ramalinga Raju?s son.
During the market meltdown, stocks of Satyam stocks fared well as compared to other technology stocks. The returns during the last one month was a negative 13.43% as compared to minus 18.82% drop in HCL stocks in the same period. In the last one-year, Satyam Computer Services stocks gave a return of minus 43.67% as compared to minus 55% in the overall BSE Technology index. The deal also comes at a time when brokerage firms had upgraded their ratings on Satyam stocks after their quarter ended September 2008 results were better than expected.
Analysts say that information technology companies are also going through a challenging phase and need to conserve their resources. The deal would wipe out all the cash on the books of Satyam Computer Services and its debts could rise.
Analysts feel that by announcing such a deal, the management was giving a bad impression and the fall in the share price on Wednesday was more of a sentimental impact and it would have a lasting impression on institutional investors, who would continue their sell-off in the short-term despite the company reversing its sell off decision.