Have cake, Will eat...

It was indeed out of the blue; the analysts tracking this firm were taken completely by surprise. Given the fact that Satyam was recently awarded for corporate governance, it was probably foot-in-the-mouth time for the promoters.

Satyam's decision to acquire infrastructure firms owned by sons of the promotor through cash payout has been widely criticized, what with the stock taking a major blow, down from INR 226 to 162 per share. Within a day, ~30% of shareholder's value in terms of market capitalization was wiped out. Exemplary shareholders' activism and subsequent annulling of the acquisition decisions has done little to support the stock price, at least in the domestic market.

Views of independent directors were largely ignored; leave aside the fiduciary duty of the board to the shareholders' in terms of related party transaction disclosures. As one analyst rightly pointed out, if the infrastructure sector growth story and diversification were indeed the drivers behind the deal as claimed by Satyam's top management, probably a merger through share-swap rather than cash acquisition could have been done, which would have helped Satyam's promoters avoid the furore.

Something here doesn't make sense. Satyam's promoters aren't that naive - such an acquisition was bound to evoke the negative reaction as it has. Then why did they go ahead with this announcement, trying to distribute Satyam's cash within the promoters through these acquisitions? One might wonder as to whether the buyback announced now is yet another covert way to transfer value to the promoters on the expense of other shareholders - what with the stock price taking a hammering, any buyback at this juncture would help the promoters consolidate their stake with less-than-ideal cash transfer to those who surrender their shares. Notably, the promoter's stake in Satyam is mere 8%; as such a dividend payout would have fetched little to the promoters. If returning cash to the shareholders is indeed the objective now, why not announce a hefty dividend instead.

Or perhaps they would consider the dividend once the buyback increase promoters' stake. Till then, watch out for the promoters further increasing share through secondary market trading.

P.S. Now that the entire Satyam story is out, turns out my call was rather on one end of the spectrum, the other being what turned out to be the reality- the Maytas acquisition seems to be the last ditch effort from the promotors to replace fictious assets by real assets. Well, there indeed was a hidden motive this related party transaction - but not shoring up promotor's stake leveraging the now battered stock price. Long live PwC :)