Analysts were surprised by the move by institutions to consider the private placement by Satyam. ``The hush-hush manner in which such a big private placement deal is being done is surprising. FIs, especially UTI, had burnt their fingers in such private placement deals in the past,'' said a broker.

When contacted, UTI chairman P S Subramanyam denied that the institution had acquired shares of Satyam in a private placement. ``We've received a proposal from the company, but we've not taken any decision,'' UTI officials said. However, the market was agog with the Satyam deal and the share price moved up to Rs 942 (ex-bonus price) on the BSE.

Satyam share has been on the rise atthe stock exchange in the last fortnight following rumours of a private placement at a high premium. On the other hand, ICICI which has planned an overseas offering has fallen to Rs 73.50 from Rs 83 in the last three weeks.

UTI and other FIs had acquired the shares of a textile/petrochemical company at a high premium several years ago. ``However, the market price of this company has never reached the acquisition price. FIs had lost heavily in such deals. FIs who are also the guardians of public money should be careful about their investment decisions,'' said a fund manager who preferred anonymity.

Satyam planned to consider the domestic private placement after its board earlier decided not to pursue its plans to raise funds from the American stock markets. In a statement issued on August 10, the company said that in consultation with its merchant banker, Jardine Fleming, it decided to shelve the plan ``in keeping the best interest of the company and investors in mind.'' However, market sources said thecompany dropped the ADR plan due to poor response from overseas investors.

The statement said Satyam Computers was exploring the possibility of an FDI in line with its fund raising plans. The company is planning to retire its expensive debts with the proceeds of this private placement issue. The company's original plan was a two-stage route leading to an ADR issue. The initial stage would have covered the proposal to raise funds through an equity placement, the proceeds of which would have been used to retire all debt on the company's balance sheet. The second stage was to list its ADRs in the US towards the beginning of the next financial year.

The company had claimed that the proposed exercise to raise equity capital would make the company debt-free and improve net profit margins.