Indian Outsourcer Satyam Diversifies Into Construction

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Satyam Computer Services, India's fourth largest outsourcer, said Tuesday it will invest in construction companies in a bid to deliver higher shareholder value in an otherwise challenging environment.

India's outsourcing industry is being affected by the global economic downturn, as some of its customers in the U.S. and Europe have delayed IT spending and cut IT budgets.

On account of the slowdown in the IT business, Satyam has decided to diversify into other businesses, starting with an investment in the construction industry, said a source in the company on Tuesday, requesting anonymity.

The news from the IT services market is not very good, but Satyam intends to hang in there until the market gets better, the source added.

Satyam lowered its revenue guidance for the year in October, citing the crisis in the US and banking financial services sector. Its fiscal year ends March 31.

In a statement to the Bombay Stock Exchange on Tuesday, Satyam said its board had approved the acquisition of a 100 percent stake in Maytas Properties for US$1.3 billion and $300 million for a 51 percent in Maytas Infra.

Both companies have their headquarters in Hyderabad, where Satyam is based. The family that holds a dominant stake in Satyam owns a stake in both construction companies, according to the source.

The acquisition of Maytas Properties will be immediate, while in the case of Maytas Infra, Satyam will acquire 31 percent from the promoters and 20 percent through an open offer to the public, in line with Indian regulations.

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