Satyam board okays sponsored ADS issue

Issue scheduled for first week of March 2005

The board of Hyderabad-based Satyam Computer Services on Wednesday approved a sponsored ADS issue, against the existing equity shares of the company.

The sponsored ADS programme will consist of 15 million ADS shares, which is equivalent to 30 million equity shares. It is at this point unclear whether the promoters will take part in the sponsored ADS programme.

The size of the issue accordingly would amount to $360 million based on the closing price of the Satyam ADS as of December 7, 2004 and includes a green shoe option. The issue, according to a press release issued by the company, is scheduled for the first week of March 2005.

V Srinivas, chief financial officer of Satyam Computers, told Business Standard that the timing of the issue would be largely dependent on the clearances by the Securities and Exchange Commission (SEC).

"We expect the sponsored ADS issue to begin in the first week of March, presuming we get the SEC clearances within a reasonable period of time. If they are delayed, then it could start during the first week of May, next year."

The price of the sponsored ADS issue may change and will largely dependent on the timing and the size of the issue. One ADS represents two local shares.

Satyam's ADRs enjoy a premium of between 30 per cent and 40 per cent over its domestic shares, and represents 10.6 per cent of its issued capital. The issued capital will go up to 20 per cent after the conversion of local shares, the press release said.

At present, the promoters hold 16 per cent of the equity in Satyam, UTI and asset management funds hold about seven per cent, FIIs another 54 per cent, while retail investors hold about six per cent.

According to Srinivas, while promoters could decide to participate in the ADS issue, it is not known yet, the equity stake of retail investors was not likely. The company will hold an EGM on January 7, 2005 to get shareholder nod for the sponsored ADS issue.

'Strong Re will hit margins'

V Srinivas today admitted that the Indian rupee's strong rise against the dollar would mean that the company's margins could be impacted to the tune of 120 basis points.

"A one percentage increase in the rupee means that we get impacted to the tune of 30 basis points in margins. Since the rupee has appreciated about four per cent against the dollar the impact could be around 120 basis points. But we are trying to offset this setback through productivity improvements," he said.