BANGALORE, Dec 24 (Reuters) - Shares in India's Satyam Computer Services Ltd fell as much as 18 percent on Wednesday on worries the Indian outsourcer's business may be impacted by corporate governance issues.
Satyam's share price has almost halved since the firm said last week it would pay $1.6 billion for two infrastructure firms in which its management held stakes and after it emerged it had been barred from business with the World Bank for eight years.
The company dropped the plan to buy the two firms within hours after investors reacted angrily.
At 1126 GMT, Satyam, India's No. 4 software exporter, was down 14.6 percent at 119.85 rupees in a Mumbai market down 0.9 percent. The stock had shed 13.6 percent on Tuesday.
'Going forward acquiring new clients is going to be more difficult for Satyam,' said Kevin Trindade, a sector analyst with brokerage KR Choksey Shares and Securities, which has a hold rating on the counter.
'Satyam will face pricing decline given the dent in corporate governance,' he said.
The World Bank said in a statement on Tuesday its decision to bar New York-listed Satyam was effective from September and it followed a temporary suspension in February.
'Satyam was declared ineligible for contracts for providing improper benefits to Bank staff and for failing to maintain documentation to support fees charged for its subcontractors,' it said.
Satyam specialises in business software and offers back-office services, but size of its business with the World Bank was not available, and a company spokeswoman has said the Hyderabad-based firm did not comment on individual clients.
Analysts say while the World Bank's decision was not linked to Satyam's botched attempt to buy the sister firms, the information had come at a time when investors were worrying about its prospects, already been hit by the economic slowdown.
Satyam, whose clients include General Electric, Nestle and Qantas Airways, cut its sales forecast in October.
It said revenue would grow between 19 percent and 21 percent in U.S. dollars in the year to March 2009, slower than the 24 to 26 percent growth seen in July.
The company may try to placate shareholders through a share buyback, which is to be considered at a board meeting early next week, but analysts said Satyam would have to do more to restore investor confidence.
'I don't think any buyback or dividend, even if they are substantial, are going to change the mood of investors now,' said an analyst with a Mumbai brokerage, who didn't want to be named as he was not authorised to speak to the media.
'What is required now is an independent board of directors and professional management. The promoters can stay there as pure shareholders,' he said. 'Last week's developments are definitely going to have a negative impact on its core business.'
(Reporting by Sumeet Chatterjee; Editing by Mark Williams and Lincoln Feast) Keywords: SATYAM/SHARES (sumeet.chatterjee@thomsonreuters.com; +91-80-3982 7450; Reuters Messaging: sumeet.chatterjee.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2008. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
Satyam's share price has almost halved since the firm said last week it would pay $1.6 billion for two infrastructure firms in which its management held stakes and after it emerged it had been barred from business with the World Bank for eight years.
The company dropped the plan to buy the two firms within hours after investors reacted angrily.
At 1126 GMT, Satyam, India's No. 4 software exporter, was down 14.6 percent at 119.85 rupees in a Mumbai market down 0.9 percent. The stock had shed 13.6 percent on Tuesday.
'Going forward acquiring new clients is going to be more difficult for Satyam,' said Kevin Trindade, a sector analyst with brokerage KR Choksey Shares and Securities, which has a hold rating on the counter.
'Satyam will face pricing decline given the dent in corporate governance,' he said.
The World Bank said in a statement on Tuesday its decision to bar New York-listed Satyam was effective from September and it followed a temporary suspension in February.
'Satyam was declared ineligible for contracts for providing improper benefits to Bank staff and for failing to maintain documentation to support fees charged for its subcontractors,' it said.
Satyam specialises in business software and offers back-office services, but size of its business with the World Bank was not available, and a company spokeswoman has said the Hyderabad-based firm did not comment on individual clients.
Analysts say while the World Bank's decision was not linked to Satyam's botched attempt to buy the sister firms, the information had come at a time when investors were worrying about its prospects, already been hit by the economic slowdown.
Satyam, whose clients include General Electric, Nestle and Qantas Airways, cut its sales forecast in October.
It said revenue would grow between 19 percent and 21 percent in U.S. dollars in the year to March 2009, slower than the 24 to 26 percent growth seen in July.
The company may try to placate shareholders through a share buyback, which is to be considered at a board meeting early next week, but analysts said Satyam would have to do more to restore investor confidence.
'I don't think any buyback or dividend, even if they are substantial, are going to change the mood of investors now,' said an analyst with a Mumbai brokerage, who didn't want to be named as he was not authorised to speak to the media.
'What is required now is an independent board of directors and professional management. The promoters can stay there as pure shareholders,' he said. 'Last week's developments are definitely going to have a negative impact on its core business.'
(Reporting by Sumeet Chatterjee; Editing by Mark Williams and Lincoln Feast) Keywords: SATYAM/SHARES (sumeet.chatterjee@thomsonreuters.com; +91-80-3982 7450; Reuters Messaging: sumeet.chatterjee.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2008. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
© 2008 AFX News
