A Fresh Lease of Life

When Chennai-based Satyam Infoway announced that two international investors–Softbank

Asia Infrastructure Fund (SAIF) and Venture Tech Solutions–would be investing

$20 million in the form of new shares, it raised very few eyebrows. The

announcement was very much expected, as rumor mills were agog for the past few

months about the Satyam Computers decision to sell off its once hyped up

subsidiary.

According to sources at Sify, "SAIF will invest $13 million that

translates into 7.56 million ADRs at a price of $1.72 per equity share.

Meanwhile, VentureTech will take 2.03 million equity shares at the same price.

Furthermore, VentureTech will shell out an additional $3.5 million in equity

shares by April 2003, as per the agreement. Once the whole transaction is

completed, the current outstanding equity base of Sify will expand from 23.2

million to 34.83 million equity shares. Ultimately, Satyam Computer’s holding

in Sify will slip to 35% (from the current 52.5%).

Down memory lane 



Sify is a classic case of entrepreneurship turned sour by overestimating the
market trends. Let us take for instance the company’s flagship Electronic Data

Interchange (EDI) offerings. In the mid 1990’s when the concept was being

debated in India, Sify jumped into the bandwagon by tying up with big names like

Sterling Commerce. But building market places on the Internet did not take off

as estimated and Sify quickly went into the realignment mode and became the

country’s first private ISP. For a country that was under the dominant fold of

VSNL, a private ISP giving Internet connections did generate some interest. But

very soon, the ISP market became cluttered with so many players and no ISP had

any say in the market, as it became too competitive. 

With the ISP business in the reckoning, the company pinned its hopes on to

the dotcom boom. Then came the Nasdaq listing and the Indiaworld acquisition.

Business analysts are perplexed about Sify’s business strategy, as it has

changed its focus very often. The dotcom era also saw the company aggressively

pushing its portal–sify.com. But in the end, the question that topped everyone’s

mind was " Is Sify making any profits?" However, the recent

developments suggest that the company was indeed going through challenging

times. And the rumor that Sify is scouting for investors became evident when it

sold its software division to Satyam Computers in January 2002 for $7 million

and claimed itself as a focused Internet company. Analysts at that time said

that the divestment of the software division is aimed at clearing the decks for

selling off Sify. 

Sify Shareholding SAIF: 21.7% VentureTech: 11.7% South Asia Regional Fund (SARF): 10.3% Satyam Computers: 35% Nasdaq ADR Investors: 17% Others: 4.3%

According to Ramalinga Raju, Chairman, Satyam Computer Services, "The

spate of investments is the result of the concerted efforts by the company in

finding the right partner." And Sify has found itself a big partner–Softbank

for instance is a well-known technology investor who has investments in success

stories like Yahoo and Verisign.

Meanwhile Softbanks’ managing director, Paul Zimmerman believes that his

investments into Sify are a value proposition and an ideal route to foray into

the Indian market. Softbank will also provide the much-needed direction to the

company to broad base its clientele in the APAC region.

G Shrikanth in Chennai