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July 18, 2001
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Money > Reuters > Report July 18, 2001 |
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Silverline says SeraNova buy may cost moreIndian software services firm Silverline Technologies Ltd said its recently acquired US subsidiary SeraNova Inc could face an outgo of more than $60-65 million as payment for liabilities of its former parent. The New Jersey-based SeraNova Inc which was spun off by Intelligroup Inc in July last year, was merged into Silverline's US subsidiary Silverline Acquisition Corp in an all-stock deal valued at $39.2 million on March 6, 2001. "The merger between Silverline Acquisition Corp and SeraNova Inc may cause SeraNova Inc to become liable for taxes payable by its former parent Intelligroup Inc," Silverline said its annual report filed with the US Securities Exchange Commission. The New York Stock Exchange-listed Silverline said that according to US laws if a company that has been spun-off is acquired or sold within a two-year period, the spin-off may become taxable to the parent. It said SeraNova Inc had agreed to indemnify Intelligroup Inc for any tax liabilities which it might incur. "It is possible that Intelligroup Inc would be liable for tax in an amount as high as $60-65 million to which would be added interest and, possibly, penalties," it said. SeraNova Inc is currently a loss-making company. Silverline's consolidated net profit for the year ended March 2001 was $26.64 million on revenue of $154.66 million, but the results had only a partial contribution from SeraNova. Silverline also said its financial performance could be affected if the operations of SeraNova were not integrated with it quickly enough. "The integration of SeraNova into our company is complex and time-consuming," it said. "Furthermore, SeraNova engages in some aspects of the Internet strategy and technology implementation services business in which we have only limited experience," it said. Silverline's shares were 1.9 per cent up at Rs 58.20 at the Bombay Stock Exchange in Wednesday afternoon deals, while the Sensex was down 0.59 per cent. Its American depositary receipts closed 3.64 per cent down at $2.65 on Tuesday.
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