MUMBAI (Reuters) - Satyam Computer Services founder and chairman B. Ramalinga Raju has backed away from a controversial deal to use company funds to buy two of his firms but he may find that was the easy part.
He now has to contend with angry shareholders who may push for a change in the composition of the board at India’s No.4 outsourcer, making life difficult for the 54-year-old.
Late on Tuesday, Satyam said it had agreed to buybuilders Maytas Properties Ltd and Maytas Infra, founded by Raju and his sons, for $1.6 billion but called it off almost immediately after its shares were hammered down 55 percent in New York.
Maytas is Satyam spelt backward.
On Wednesday, investors were still simmering, sending Satyam shares down almost a third to their lowest in more than four years. Angry fund managers were asking on television how founders with a 8.6 percent stake in the firm could unilaterally take the decision to strip it of $1.6 billion.
A rash of downgrades from brokerages added to the mayhem.
Softly spoken Raju, who was born into a family of farmers, said he did not anticipate such a backlash but respected his shareholders wishes.
A management graduate from Ohio University, Raju moved away from agriculture to start a textile unit in 1977 before later moving into real estate.
In 1987, he founded Satyam Computer along with his brother-in-law D.V.S. Raju and took the company public in 1991. In the same year, he bagged his first offshore contract from tractor maker John Deere & Co.
He steered the company in the next decade by snapping up joint ventures with the likes of General Electric and U.S. defence and auto parts firm TRW Inc, which was acquired in 2002 by Northrop Grumman.
Raju was among the first to spot the outsourcing opportunities of the turn-of-the-millennium Y2K computer problem, which saw the coming of age of Indian outsourcers, including Infosys Technologies and Wipro.
He then followed up with six acquisitions over the next few years, taking the firms’ annual revenue to $2.1 billion in 2007/08.
With growth slowing and with more than $1 billion in cash on the company’s books, Raju is likely to face another test, investors say, with the institutions that own 61.6 percent of the firm likely to push for a change.
“They would have little choice but to force a change in the board or sell their holding,” said Arun Kejriwal, director at research firm KRIS.