In an email to staff, Raju said Satyam is committed to is core businesses. While the idea that we could diversify into an unrelated business was rejected by our investors, it was formed with the belief that doing so would not imperil our leadership in our core business or lessen our commitment to it, and that all stakeholders would benefit. Satyam did notand does not nowintend to retreat from IT and BPO services in any way.
The communication, however, did little to mollify irked institutional investors and analysts who are seeking stern action, including strengthening Satyams governance, inter alia, by increasing the size and altering the composition of the board. Completing this ongoing task, in my view is a public duty and responsibility and I intend continuing on the board at least till this commitment is fulfilled, Raju stated in a separate release.
On the possibility of the board being reconstituted and the existing management continuing, Viju George and Kunal Sangoi of Edelweiss Securities stated in a report: This is purely cosmetic. In our view, investors will not be appeased with this course of action unless management is forced out. After all, they could perceive the board (and some of the stalwarts in it) as ineffective, but not dubious. Shareholder activism would have failed if the management continues, said the head of equities at a large Indian stock brokerage.
Raju, however, indicated confidence building as one of his priorities, saying, We have also been in contact with many of our investors, and we have taken key steps to regain their confidence. The board will meet on January 10, 2009 to consider these options and to chart a course of action that would boost stakeholders confidence further.
Meanwhile, refuting rumours, TS Prasad, an independent director, reiterated that he would not be quitting the company. Doubts are being raised on the continuance of the other independent directors on Satyams board, from which four directors have already resigned. I am of the view that resigning from the board now is like deserting a troubled ship. Restoring the confidence of all these stakeholders is the task of utmost importance awaiting the consideration of the board.
Analysts reckon that the most likely outcome is a less than 15% strategic sale and a change in management. This is because at beyond this, the cost of an open offer would be untenable for investors given the current stock price slide. It is estimated that the open offer price would be at around Rs 300 when the market price for Satyam stock is at around Rs 148.
Strategic investors will also be weighing the consequences of the Upaid dispute and will be checking in for more details, said a fund manager. Upaid has demanded $1 billion in damages and the management will have a challenge battling this as well.