/dq/media/agency_attachments/UPxQAOdkwhCk8EYzqyvs.png)
Follow UsIt’s been a hell of a year for the NYSE listed Silverline Technologies Ltd.
Its reckless acquisition spree, an obnoxious amount paid for a pure play ebiz
company, and the technology downturn have all added up to its woes which has
translated into a Rs 100 crore debt. It will be a wonder if the company can come
out unscathed from its present troubles and still post a growth to retain its
pre-eminent position in the Indian software exports market.
Silverline was ranked 18 in the DQ Top 20 survey for the year 2001-2002 with
revenues of Rs 780 crore and a growth rate of 10%. Silverline acquired three IT
firms, CTC Corporation, E-com Server Inc and SeraNova of the Intelligroup. In
fact, Silverline’s own officials admit that its acquisition of SeraNova was
its undoing. Industry veterans term it as an unnecessary trouble. In 2001,
Silverline paid close to $40 mn in a stock-cash deal to acquire SeraNova, a pure
ebiz player.
By the end of this deal the writing on the wall was clear. Silverline’s
finances were in doldrums. The wake up call came when its primary banker in the
US, HSBC served a notice to repay part of a whopping $ 40 mn debt the company
had raised. The company had to act fast for its business model wasn’t helping
it to overcome market economics and its e-business from its SeraNova acquisition
tanked. The company did act fast. In April 2002, the company moved its
headquarters to India after having consolidated all its entities under one roof,
which contributed to a combined revenue figure big enough to catapult it into
the big league. In June 2002, it brought in Dr Nirmal Jain as its vice-chairman,
president, and CEO. Dr Jain quit Silverline months after his appointment.
Informed sources say that he was rattled by the accounting practices of the
company. Dr Jain’s departure was a signal of the things to come. The company
announced a loss of Rs 6.47 crore for the first half 2002-03. The pitch has been
further queered by its NYSE listing which went underwater–below the $1 water
mark which would put companies listed on the bourse on a 60 day notice to move
above the danger or get delisted. The scrip on NYSE was trading around $0.6 as
on January 15, 2003 down from a 52-week high of $2.48. Reflecting this, its NSE
listing too slipped from a 52-week high of Rs 70 and was trading around Rs 15 as
on January 15, 2003.
The biggest hit came in when Punjab National Bank said it has served a 60
days notice under the Securitization bill on the company. The bank has intimated
the company to either make good its Rs 4 crore loan or risk having its immovable
property in Mumbai–a residential complex–attached. According to market
reports soon after the PNB incident over one crore shares changed hand pointing
at a sellers market in the scrip. Nothing can be more deplorable for a company,
which raised $17 million from its GDR issue in the Luxembourg Stock Exchange
than to roil in debt. Apparently, the company has paid all of HSBC’s
outstanding except for the last $4 mn. It is negotiating with the bank on a
payment schedule. There are, according to sources, a long list of debtors with
whom the company is drawing up a payment schedule.
Silverline’s customers meanwhile started a mass exodus. This suited the
company too well since it paved way for a reduced overheads. If this exodus
continues then Silverline may be at the end of the rope. For a company, which
plans to start afresh and look at BPO and ITeS businesses, losing clients is not
a pill to that can be swallowed easily. Among the companies, which bought
Silverline’s businesses are Cognizant Technology Solutions and i-Flex
Solutions. Silverline today is leaner and meaner. From 1,800 people it has
reduced it manpower to 400. Does that mean it is the end of the road for
Silverline. "No," say insiders. "We will take a while to make
good our debt and climb back into healthy business in the coming years." A
lot, however, depends on the investors and the bankers who will decide the fate
of the company in the days to come!