Satyam has sold off its 32% stake in its offspring Sify Ltd. The stake has been bought for $62.62mn in an all-cash deal by Infinity Capital Ventures
CHENNAI/MUMBAI: Hyderabad-based software major Satyam Computers has sold off its remaining 31.61 % stake in its loss-making offspring Sify Ltd.
The stake has been bought for $62.62 million (Rs 286 crore) in an all-cash deal by Infinity Capital Ventures, a company owned by Silicon Valley entrepreneur Raju Vegesna.
Vegesna has been appointed Sify chairman, and his stake will be raised further to 40 % shares by Sify making an additional offering of equity worth Rs 172 crore.
Nasdaq-listed Sify, started seven-and-a-half years ago by Satyam, is a leading internet, network and e-commerce services company.
It runs the Satyam iWay internet cafes, among other things. Apart from Vegesna, Infinity will nominate another board member to Sify’s board.
Post-infusion of fresh capital, Sify’s equity base will expand to 44.8 million shares on a fully diluted basis and the company will have about Rs 286.3 crore of total cash in hand.
In the deal, each American depository share (ADS) of Sify’s was valued at $5.60, at a 7.5% premium over the one month daily average price as quoted on Nasdaq.
This has seen Satyam’s initial $5.9 million investment yield a return of $117 million, the company said on Thursday.
Vegesna, whose company ServerWorks was acquired by Broadcom for $1.8 billion in 2001, later founded ServerEngines, LLC.
“Sify has done well to innovate and grow its businesses in Internet and network services in India. I am excited at the prospect of helping Sify realise its potential by building upon its market-leading iWay cyber café and Enterprise Solutions business segments while further exploiting Sify’s expertise in Internet and network technologies.
Sify’s existing core businesses provide a strong platform for future growth both organically and through possible acquisitions,” said Vegesna.
Satyam’s divestiture is in line with its stated objective to emerge as a pure play IT services and Solutions Company.
Satyam’s chairman B Ramalinga Raju (pictured left) said the move would enable his company to further focus on its core business and “unlock the value of its investment.”
Sify managing director and CEO R Ramaraj said that he was happy that Satyam had divested to a “strategic investor with a long-term interest in Sify’s growth and future”.
Set up in April, 1998, Satyam first divested a nominal 1.6% equity in favour of the government of Singapore Investment Corporation Pte, bring its stake down to 54.7%.
In 1999, Sify acquired Rajesh Jain’s Indiaworld for an eyepopping Rs 500 crore.
Then, with the Internet bubble going bust, and analysts questioning the wisdom of holding on to a loss-making outfit, Satyam decided to gradually offload equity in 2001.
The following year saw investment funds — SAIF and VentureTech — pump in $20 million, bringing Satyam’s equity down to 32%.
Sify reported revenues of $26.7 million for the second quarter ended September 30, 2005, 36% higher than in the last corresponding quarter. Though it made a cash profit, the net loss was pegged at $1.40 million.
Even so, the parting has been emotional. As Satyam’s chief financial officer said, “It was our baby. But we are proud to have created tremendous value in terms of returns and brand, apart from being the first private sector Internet service provider in the country”.
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