Sify is not only the largest Internet services provider in the country, but is also engaged in providing software services (web solutions) to its customers in India, Australia and the US. The division, which employs about 200 people, had contributed about 20 per cent to Sifys turnover of $10.9 million in the last quarter.

Satyam is likely to buy out this division valued at approximately $7 million before selling Sify, thereby becoming a focused software company. Based on the current valuations of $1.10 at the Nasdaq, Sifys market capitalisation stands at around Rs 500 crore.

Analysts feel it would be in Satyams interest to get out of Sify, as the beleaguered subsidiary has been incurring losses, in turn adversely affecting market valuations of Satyam Computer Services.

Sify, which began as a 100-per cent subsidiary of Satyam Computer Services, is now its 53-per cent subsidiary, after it sold its 41-per cent stake to Commonwealth Development Fund and to general investors through ADR offerings. This had brought down its stake to 59 per cent. Nevertheless, it sold another 6 per cent to the Government of Singapore Investment Corporation in May 2000.