UPDATE 3-More directors quit troubled Satyam; shares rise
(Recasts with resignations, add details)
BANGALORE, Dec 29 (Reuters) - Three more directors quit India's Satyam Computer Services (SATY.BO) on Monday, but its shares rose after the firm said it would consider more options to improve shareholder value and corporate governance.
New York-listed Satyam (SAY.N), India's No. 4 software services exporter, has seen its shares plummet by about 40 percent since a botched attempt two weeks ago to buy two infrastructure firms in which management held stakes.
The embattled company, hit by accusations of a lack of transparency, said at the weekend that it had hired DSP Merrill Lynch to review ways to enhance shareholder value, but did not give further details.
Satyam postponed a board meeting on Monday to Jan. 10 to give itself more time to consider options to shore up investor confidence, which analysts said could include a change of management as well as the board and a share buyback.
"The move shows that they are serious about the need to do more than just a share buyback, especially after such a hue and cry raised by investors," said Harit Shah, a sector analyst with Angel Broking in Mumbai.
In the latest twist, Satyam said three more independent directors, Krishna Palepu, Vinod Dham and Mendu Rammohan Rao, had quit. Palepu and Dham's resignations were effective Sunday, while Rao's came into effect from Monday.
Last Friday, the company announced the resignation of independent director Mangalam Srinivasan.
Shares in Satyam rose as much as 17.8 percent on Monday before ending up 9.4 percent at 148.25 rupees, their biggest gain in more than two months.
The board had been expected to consider a share buyback at the Monday meeting, but news last week that the outsourcer had been barred from doing business with the World Bank added to its woes. [ID:nBOM418756]
NO REASONS GIVEN
The firm did not give any reason for the resignations. After the spate of exits, the strength of the 9-member Satyam board has been reduced to five with two independent directors remaining.
Chairman B. Ramalinga Raju said in a statement the reconstitution of the board would be an important item for discussion at the Jan. 10 meeting.
"These moves were expected as a lot of questions were raised about the credibility of the independent directors after the infrastructure diversification plans were announced," said Tejas Doshi, a sector analyst with Sushil Finance.
"A lot of damage has already been done and management is looking at all the options to redeem themselves."
Earlier on Monday, the Mint newspaper quoted the U.S.-based Dham as saying the January board meeting would discuss a change in management, including the possible exit of Chairman Raju. It would also discuss appointing a chief executive or even a sale to another entity, the paper said.
"There are some issues that I know of, but there are some others that I am not aware," Dham, known as the father of the Pentium chip, was quoted as saying.
A Satyam spokeswoman told the paper Dham's comment was "all conjecture till the board takes a decision". The company declined comment on the report when reached by Reuters.
"I am expecting major developments, including the company getting a strategic investor on board and a change in the composition of the board," Angel's Shah said. "If you change the management things would look very different, and I am betting on that."
STRATEGIC OPTIONS
Analysts said any measures the outsourcer would take to improve business practices and transparency would be crucial to sustain the stock's gains in the near term.
The company said on Saturday its board would consider moves to strengthen the firm's governance structure, including increasing the size and altering the composition of the board.
The meeting would also address issues arising from a possible dilution of the founder's stake in the company, which specialises in business software and offers back-office services.
The World Bank said last week Satyam had been declared ineligible for direct contracts with it for eight years "for providing improper benefits to Bank staff" and for failing to provide proper documentation for fees charged.
Satyam has asked the authority to withdraw what it called "inappropriate" statements and to issue an apology, but the World Bank in Washington has stood by its statement. (Editing by Ranjit Gangadharan, Kim Coghill and David Cowell)
