Satyam Infoway prices ADS at $80; $ 130 m issue oversubscribed
Satyam Infoway has priced its second Amercian Depository Shares issue at $ 80. This is to be used to fund the second leg of its $115 million acquisition of Indiaworld Communications.
Satyam Infoway one of the Internet service providers, has around 87,000 subscribers with services being offered in the 27 cities throughout India. The revenues of the company for the first half stood at Rs. 208 m with around 40% of its revenues from internet services, another 40% from the internet roaming software and the balance from e-commerce, EDI and ATM relay services. The company has a loss of Rs. 140 m in the first half.
The last time the company had issued an ADS, it was priced at $18. Thereafter the company had announced a 4 for 1 split to improve the liquidity of its ADSs. The Indiaworld acquisition has helped the Satyam Infoway raise its valuations and price its issue at current levels.
However, the frequent dilutions will hit the company’s net worth in the future if the Indiaworld sites do not generate enough revenues in the future. In the current year the company is estimated to report a loss in the range of Rs. 220 m, but with even US investors getting restless with the loss making dot com companies there could soon be a time when investors start demanding adequate return ratios for valuations to stay at current levels.
For the present though, the sentiment would boost the valuations of the parent Satyam Computers too. The parent holds 59% of Satyam Infoway’s equity.
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