MUMBAI The IL&FS group will take management control of Maytas Infra and acquire an additional 22.51 percent stake in line with a government order, the two companies said in separate statements on Monday.
The Company Law Board, based on an application by Maytas, has instructed the builder to induct IL&FS Financial Services as a promoter and allow it to assume management control, Maytas said earlier in the day.
"There has been a consensus amongst the stakeholders to change the existing promoter of the company so as to restore the credibility of the company and to bring in necessary funds in the company," Maytas said in a statement.
Cash-strapped Maytas was controlled by the family of Ramalinga Raju, promoter of Satyam Computer Services, who resigned from the software firm in January, after revealing that profits had been inflated for years.
Since then, Maytas has been put under the government scanner.
Earlier in the day, Maytas' shares rose by the daily limit of 5 percent to 112.80 rupees. After the news, IL&FS Investment Managers, a part of the IL&FS group and a sister company of IL&FS Financial rose as much as 20 percent.
IL&FS Financial owns 14.5 percent stake in Maytas Infra, according to data based on the June quarter on the BSE.
ICICI Bank, IDBI Bank and State Bank of India, key lenders to Maytas, invited IL&FS to take a strategic role in Maytas to help revive the company, IL&FS said.
"The collateral damage from the Satyam episode has affected Maytas Infra as the entire banking arrangement of the company were frozen, customer contracts cancelled and relationship with vendors, joint venture partners comes to a standstill," IL&FS added in the statement.
Maytas lost the Hyderabad metro rail project worth 150 billion rupees after the Satyam scandal. Maytas shares have lost about a third since the scandal broke.
IL&FS group, promoted by Central Bank of India, Housing Development Finance Corporation Limited and Unit Trust of India (UTI), focuses on the commercialisation and development of infrastructure projects.
It provides expertise to provide project completion including planning, documentation, finance and execution of projects.
But analysts were not as enthused by the news or the share price jump. The new management will take time to show results despite the possibility of fresh funds and the group's construction experience, they said.
"I don't think (Maytas') profitability will improve because a lot of projects are stalled and a lot of employees have also left. There will also be a lot of penalties from the clients' side because of delays," said an analyst who declined to be named.
Late on Saturday, Maytas posted a net loss of 4.9 billion rupees ($101 million) in 2008/09 against a net profit of 996.4 million rupees a year ago.
"It won't be out of trouble soon," the analyst added. He expects to see losses from the company for a year.
Maytas will hold a press meet in Hyderabad later on Tuesday, a company spokesman said, declining to give further details.
A spokeswoman for IFCI, which holds over 8 percent of Maytas, declined to comment if the firm would sell its holdings.
(Additional reporting by C J Kuncheria in NEW DELHI)