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Follow UsBy Suresh Seshadri
MADRAS: Satyam Infoway, a leading Indian Internet service provider, said on Wednesday its plan to sell its software services business to its parent was unlikely to hurt future earnings. Satyam Computer Services announced earlier in the day it plans to buy Satyam Infoway's software services business -- valued by the companies at an estimated $7 million -- by January 1, 2002.
India's fourth-largest software exporter, which also announced its second-quarter results on Wednesday, said it plans to sell all or part of its 52.5 per cent stake in Satyam Infoway if it gets an attractive price. "It is expected that the sale of the software services business will not have an adverse impact on Satyam Infoway's EBITDA (earnings before interest, tax, depreciation and amortisation) levels," a statement quoted its chief executive, R. Ramaraj, as saying.
Last week, Satyam Infoway announced it had posted a net loss of $117 million in the July-September quarter after it took a one-time non-cash charge of $109.3 million to write off goodwill and acquisition costs relating to a clutch of portals it bought.
The country's largest private Internet provider, however, pruned its cash loss by 21.3 percent to $4.8 million from $6.1 million in the quarter to June.
The company said its software services business contributed 20 percent of the past quarter's revenue of $10.9 million, and served clients in India, Australia and the United States.
"Satyam Infoway will continue to focus and pursue growth in the broad range of profitable corporate Internet services including networking services, hosting services, managed services, virtual private networks and premium bandwidth," the company said in its statement.
Strategic sale
Both companies have been approached in recent times by several firms seeking to buy Satyam Computer Services' stake in Satyam Infoway, Ramaraj told Reuters.
"We have both been approached by potential strategic partners as opposed to just financial investors, and as Satyam has said earlier today, they will actively pursue this till a right fit is found that will be beneficial to all." He said it was entirely up to the buyer and seller to decide on the right valuation.
Satyam Infoway's American Depositary Receipts (ADRs) were up 4.5 per cent at $1.15 in opening trade on the Nasdaq on Wednesday. The ADR, which is one-quarter of an underlying share, has lost over 91 per cent from its 52-week high of $12.88 hit on November 3. The ADR has, however, recovered nearly 60 percent from a low of $0.72 touched in post-September 11 trading.