IT services giant Satyam has abandoned the takeover of two Indian building groups after investors reacted with horror to the proposal.
Satyam shares fell over 30 per cent on the Indian stock exchange and more than 50 per cent in New York after it said it would pay $1.6bn for 100 per cent of Maytas Properties, which develops new towns, hotels and retail spaces, and for a 51 per cent stake in Maytas Infra which builds roads, railways, water treatment plants and other infrastructure projects.
The plan was diversify out of IT services as well as adding a new business vertical in which to sell such services. But yesterday Satyam said it was abandoning the plan after the hugely negative response from investors.
B. Ramalinga Raju, Satyam Chairman, said, “We have been surprised by the market reaction to this decision even though we were quite positive about the merits of the acquisition. However, in deference to the views expressed by many investors, we have decided to call off these acquisitions.”
Part of the problem with the deal was that, despite claims from Satyam that it followed exacting corporate governance rules, Raju's sons have senior posts in both firms - Rama Raju Jnr is vice chairman of Maytas Properties and B Teja Raju is vice chairman of Maytas Infra. ®