Satyam Infoway has a $115 million second ADR lined up. The follow-up ADR is to fund the second leg of its recent acquisition of Indiaworld Communications.
Along with this move the company has also announced a 4 for 1 split of its ADRs. The split is aimed at improving liquidity in the ADR market.
The company had priced its last ADR at $ 18 per ADR. This time the price could well be in the range of $125 per ADR. This would also imply a less than 5% dilution to its equity.
It is an established practice among tech stocks to raise funds, make acquisitions and use the subsequent valuations to raise additional cash. It is purely a play on valuations.
Satyam Infoway one of the ISP subscribers, has around 87,000 susbcribers 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. Satyam Computers holds 59% of Satyam Infoway’s equity.
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