Satyam Computer a leading IT comapny announced that it will acquire 51% stake in Maytas Infra and a 100% stake in Maytas Properties. The company said that the acquisition of Maytas’ two companies will cost it USD 1.6 billion. It added that it will buy 31% stake from Maytas Infra’s promoters at Rs 475 per share.

Satyam Computer added further that it will make an open offer for 20% in Maytas Infra. The company said that Maytas acquisition will de-risk its core business.

Speaking at the company’s concall, Satyam Chairman and Founder B. Ramalinga Raju, said the move is d
riven by a need to adopt diversification strategy. He said the current business event is challenging; thus, Satyam needs to diversify the business model for drawing success. He feels that in the recent times it is difficult to make a strategic deal with other IT companies.

Raju added that the deal will de-risk the core business of the company as a new vertical-mitigated risk in developed markets. The two companies, he said, offer significant upside in the future.

Raju further said that the company doesn’t require shareholders permission for the deal. He pointed that USD 1.3 billion will go to the promoters of the Maytas Properties and not the company. Maytas Properties valuation has been done by big four firms, will not disclose the name of firms, he said.

Raju pointed that Maytas Properties PAT is almost 20–25% and that its EPS level dilution will only be for the first year and second year on the EPS is expected to improve.

With entry into the consturuction maket, it is left to see if such a diversification could prove beneficial for Satyam and its shareholders. Having said so, it have never taken such steps to foray into other markets and more so without taking into account of the shareholder opinions and it seems like the sahreholders would need some time to adjust to the new risk profile the company offers with such an aquisition.

Do you feel that this move could mitigate the risk factors IT businesses are facing? Or would it lead to additional financial pressures on IT businesses facing a monetary crunch in this market slow down period?

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