Satyam promoters’ equity stake falls to 5.13 percent

BANGALORE - The 8.27 percent minority stake of promoters in IT bellwether Satyam Computer Services Ltd slumped to 5.13 percent after their shares, pledged with financial institutions, were sold in the market, the listed firm disclosed to the Bombay Stock Exchange (BSE) late Friday.

In a letter to the BSE, Satyam company secretary G. Jayaraman intimated that 21,148,503 shares of the promoters mortgaged with the lenders through a family-owned holding firm were sold in the market ‘for an undisclosed sum’.

‘Of the 55,728,000 shares held by the promoters through SRSR Holdings Ltd, 21,148,503 shares were sold in the market by the institutional lenders with which the shares were pledged,’ Jayaraman mentioned.

After the sale, the promoters hold 34,579,497 shares or 5.13 percent of the Hyderabad-based company’s total equity.

‘Out of the post-sale shares, 21,965,178 shares remain transferred to lenders’ account under pledge invocation,’ Jayaraman said in the letter, sent after trading ended for the day.

If the mortgaged 21,965,178 shares are excluded from the promoters’ holding post-sale (34,579,497), the actual shares held by them through SRSR are 12,614,319 only, or around 1.89 percent of the company’s total shares 670,479,293 as of March 31, 2008.

According to the company’s annual report for fiscal 2007-08, the promoters had 8.41 percent holding, which subsequently declined to 8.27 percent. Foreign institutional investors (FIIs) collectively hold 323,292,147 shares or 48.22 percent, while Indian financial institutions (FIs) 13 percent and the remaining (around 31 percent) by retail and other shareholders.

The principal promoters include Satyam founder chairman B. Ramalinga Raju, executive director B. Rama Raju and his family members.

SRSR Holding is a family-owned investment firm floated by Rajus in September 2006 to leverage shares held by them in Satyam and other associated firms in which they invested.

Other firms include Maytas Properties and Maytas Infra that Satyam backed off from buying for $1.6 billon (Rs.79.2 billion/Rs.7,920 crore) Dec 17 after institutional investors revolted against the controversial deal.

The besieged promoters admitted to BSE Dec 29 that their minority holding in Satyam would have been diluted by institutional lenders if all the mortgaged shares were sold by the latter in the market to protect their margin calls.

A margin call is a call from a broker to an investor demanding cash deposit to purchase or short sale of securities or cover an adverse price movement in the shares held by the latter but pledged with the broker as a collateral security.

In the case of Satyam promoters’ shares, analysts say at least two institutional firms (lenders) would have dumped the mortgaged shares in the market to protect their margins from the price at which the shares were held by them.

Incidentally, Raju has also asked the management to include the dilution of the promoters’ holding in the agenda for consideration at the rescheduled board meeting Jan 10.

The Maytas’ deal fiasco also led to the exit of four independent directors from the board in succession over the last nine days.

Global technology research firm Forrester Research sounded its global clients Dec 31 that the beleaguered company was heading for a major shake out or a possible takeover as a consequence of its management’s bid to diversify from core IT business into realty sector by dipping into cash reserves of $1.2 billion (Rs.53 billion/Rs.5,300 crore)