Search the Internet          Tips  Sites: Finance, Investment

Satyam to file $110-million ADR at Rs 242

Ganesh Ramamoorthy/T M Arunkumar

Hyderabad-based software major Satyam Computer Services seems all set to go ahead with its proposed American depositary receipts issue soon.

The size of the ADR is expected to be around $110 million with a 15 per cent green shoe option.

Market sources said the ADRs would be listed on New York Stock Exchange in a matter of a few days, although company officials vehemently deny any such move. It is also said that the ADRs would be priced at around Rs 240-245.

"We have nothing to say about it now. No comments," a company spokesperson told NetScribes.

Though it is known all along that Satyam would file for its ADR, what comes as a big surprise is that the demand is so strong there may not be a need for a roadshow.

Satyam has already appointed US investment bank Merrill Lynch as the sole book runner to the issue. When contacted, officials at DSP Merrill Lynch were not willing to comment on the issue.

"The details are being worked out at this point and the public filing is on," said a senior DSP Merrill Lynch official.

A part of the amount raised through the ADR is likely to be deployed to repay its existing debt and for expansion, while the balance is expected to be kept in reserves to be utilised for mergers and acquisitions.

"Satyam is known for its aggressive mode of operations. They are known to jump at every opportunity. The current low valuations of software companies may thus be used to get a jumpstart into the bigger league," says Nayan Mehta, analyst at a leading foreign brokerage house.

While the timing of the ADR may not be the best given the bad global market conditions, analysts say the high institutional interest seen in Satyam, may well help the ADR, which is expected to be in the form of institutional placement, get a good response.

The Satyam board had recently approved the hiking of FII holding in the company from 40 per cent to 49 per cent and is awaiting the necessary clearances from the Reserve Bank of India.

The company's shareholders have already approved the move to enhance the FII ceiling in the company. Shares of Satyam closed at Rs 242.30, up 8 per cent from its previous close of Rs 224.70 with volumes of over 12 million shares on the BSE on Tuesday.

Analysts expect the ADR issue to bring in short term upsides for the stock, as it would bring in more visibility in the US amongst the US clients.

Satyam scrip has been in limelight since last week on the back news reports of increased offshore orders and the aggressive stance adopted by the management to rope in more business.

Meanwhile, with good news flowing for the company, the US-based brokerage house, Jardine Fleming and Credit Suisse First Boston have put a one-month price target of Rs 350 and Rs 335, respectively.

At its current market price, the scrip is trading at a forward earnings multiple of 15 times FY02 annualised earnings.

Money

Business NewsSatyam to file $110-m ADR at Rs 242

Tell us what you think of this report