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