US slump upsets Seirra Atlantic’s investment plans

HYDERABAD: In what may be termed as an off-shoot of the US slowdown, Seirra Optima Ltd (SOL) has announced that its US-based associate firm Seirra Atlantic, has dropped plans to invest Rs 60 crore in the company.

Sierra Atlantic, in November 2000, had committed itself to subscribe 21.50 lakh optionally convertible debentures of SOL at the rate of Rs 312, each. SOL's stock was quoting at Rs 270 at that time. The proposed investment was aimed at increasing the stake of the US firm in SOL to 55 per cent from the existing 26 per cent.

Seirra Atlantic, which was to invest around 60 crore in SOL, had agreed to pay 15 per cent of the amount upfront and the rest in 18 months time. According to Sierra Atlantic founder and chairman Raj Reddy, the firm had taken the decision following the bleak scenario following the US economic slowdown. "The rapid decline in the US market forced us to withdraw the proposed investment plans in SOL," he added.

SOL revenues and profits for the fourth quarter will be affected by an increase in employee compensation effected from January, in addition to the slowdown. "The fourth quarter will face a drop in the revenue figures as against the third quarter figures," said SOL senior director (marketing), Sanjay Khendry.

The company, that employs 250 professionals, will now foray into Asia Pacific region with the aim of countering the drop in revenues. At present 85 per cent of its revenues come from the US market.