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Satyam to Float $120M ADR Soon

The deck is cleared for $120 million American Depository Receipts (ADRs) issue by the Satyam Infoway, India's first private ISP, as the Finance Ministry of and Foreign Investment Promotion Board (FIPB) has approved its proposal to increase the size of its issue.

Satyam may be quick off the blocks to launch the offering in the US, considering the fact that a few other Asian issuers, including some IT companies from China and Hong Kong, are scheduled to hit the market over the next couple of months, say inside sources.

Earlier, FIPB had permitted the company to issue 4.8 million share through ADRs at a premium of Rs 490 per share. In addition to this Satyam has decided to float 1.65 million shares. The premium on the shares of Rs 10 each has also been revised from Rs 490 per share to Rs 790 per share. The total issue is now estimated to mop up Rs 516 crore (about $120 million) on 6.45 million shares.

The ADR proceeds were expected to be utilized for setting up more international gateways.. The additional funds would be used for acquisitions and infrastructure. The acquisitions might also extend to companies with synergistic operations, including infrastructure providers, given the company's interest in setting up last-mile access links to consumers.

According to Satyam officials, the subscriber base of Satyam Infoway has a subscriber base of 75,000 plus additional 70,000 of IGNOU students for who Satyam Online access had been bundled alongwith courseware. The ISP currently has 23 points of presence (POPs).

According to Pradeep Lakshmanan, vice-president of sales at Satyam, the company is in the process of expanding its reach in terms of subscribers as well as PoPs. It is looking to increase subscriber base to 200,000 across 50 centres within this year. Hence the operations were expected to require around 10 gateways.

Additional gateways would also reduce the company's dependence on dedicated lines leased from the Department of Telecom (DoT) to link non-gateway nodes to gateways. The enhanced proceeds of the ADRs were likely to be used to improve infrastructure.

Satyam will embrace direct selling as a new line of marketing and promoting its Satyam Online brand besides channeling sales through retail outlets and partners. Its first major-direct marketing initiative -- the OTS (opportunity to see) campaign, which used mobile vans -- was recently carried out in Calcutta's upmarket.

Satyam Infoway is a subsidiary of Hyderabad-based Satyam Computer Services Ltd. It has partnered with Sterling Commerce, CompuServe and Open Market Inc, of the US to provide end-to-end electronic-commerce and Internet services and products.

Product offerings range from basic messaging, EDI, Intranet solutions to Internet commerce and Web-based solutions.

Incidentally, Satyam Computer also plans to float ADR issue during the first quarter next year.