Three more directors resign from Satyam board

Bangalore, Dec 29: In a day of swift developments, two independent directors M. Rammohan Rao and Vinod K. Dham and non-executive director Krishna G. Palepu resigned from the board of Satyam Computer Services, India's fourth largest IT bellwether.

"The three directors have sent in their resignations from the board. We have intimated the stock exchanges," Satyam company secretary V.S.N. Raju told IANS from Hyderabad over phone.

Rammohan Rao is the dean of the internationally-reputed Indian School of Business (ISB) in Hyderabad since 2004.

Dham has been on Satyam board since January 2003. Known as the 'Father of Pentium', he is currently the managing partner of IndoUS Capital LLC, a venture capital firm in the US that invests in Indian start-ups.

Palepu, who has also been on the board since January 2003, is the Ross Graham Walker professor of business administration at the Harvard Business School.

On Dec 25, another independent director, Mangalam Srinivasan, resigned from the board.

Incidentally, Dham, Palepu and Srinivasan are all based in the US.

The spate of resignations follows the top management's aborted bid to acquire the two realty firms-Maytas Properties and Maytas Infra, run by two sons of Satyam founder chairman B. Ramalinga Raju, for USD 1.6 billion (Rs.79.2 billion) to bail them out of cash crunch.

Rammohan Rao is reported to have chaired the board meeting when the controversial buyout deal was approved.

In her letter to Raju, Srinivasan said she was resigning on moral grounds for not casting a dissenting note against the proposed acquisition of Maytas' at the last board meeting in Hyderabad Dec 16.

The 69-year-old Srinivasan, who was on the Satyam board since 1991, is a leading management consultant and a visiting professor at many US universities. She is also on the board of directors of Technology Information Frontiers Ltd, a Hyderabad-based computer systems design firm.

The management called off the deal Dec 17 bowing to pressure from institutional investors and analysts who questioned the board's decision and charged it with lacking transparency and corporate governance, as minority and other shareholders were not consulted or taken into confidence.

The resignation of the four directors reduces the effective strength of the Satyam board to six members from 10.

Of the six, three are independent directors (T.R. Prasad, V.P. Rama Rao and V.S. Raju), two executive directors from promoters (Ramalinga Raju and his brother B. Rama Raju) and a whole-time director (Ram Mynampati).

Meanwhile, the management has rescheduled the board meeting to Jan 10 from Dec 29 to consider a proposal for buy back of shares by promoters. Raju has also asked the board to include the possible dilution of the promoters' holding in the company in the agenda.

In a related development, the USD 2-billion company Monday informed the Bombay Stock Exchange (BSE) that the minority holding of the promoters would have been diluted by institutional lenders with whom their shares were pledged through a holding firm.

"The promoters had pledged all their shares with institutional lenders through SRSR Holding Ltd in September 2006. Their holding would have been diluted if the lenders had exercised the option to liquidate the pledged shares," the company said.

The promoters, including Raju's relatives, hold a minority stake of 8.61 percent in the company. SRSR Holding is a family-owned investment firm.

Foreign institutional investors (FIIs) collectively hold a majority stake in Satyam, with 48.22 percent of the total equity, while Indian financial institutions (FIs) hold 12.91 percent. Others, including retail investors have the remaining 30.38 percent of the equity.

Satyam's share price has plunged by about 35 percent from Rs.226.50 (Dec 16) to Rs 148.10 Monday.