Blog on Indian Economics, Personal Views and Interests

Satyam future to be out soon? L&T is the winner anyways

0

Satyam’s future would be out soon? There are conflicting reports in the market about the stance of Spice Group. Some section of media is reporting that Spice group is being seen as the favorite for purchasing Satyam, while it is also being reported that Spice would move out of the Financial bid citing irregularities as reason. What is going on is something every one is guessing!

Tech Mahindra and L&T would benefit the most from this acquisition since they have their own set ups and this move would be a inorganic growth for both the firms. Arranging finance would be a problem for Tech Mahindra without active backing from the parent group, Mahindra, while Spice is full of cash following the recent sale of Spice Communications.

L&T might just have the edge by the virtue of its 12% stake in Satyam. The moment Satyam went down the spin, L&T started buying Satyam shares madly, seemingly anticipating this move would prove fruitful in case the company goes on sale.

This risk taken by A. M. Naik will be paid off if it wins Satyam. L&T will have to purchase 12% less than its competitors if it wins the bid. If it fails, then too L&T will be the real winner in monetary terms. Imagine if the deal by the successful bidder is finalized at say, Rs. 300 per share. L&T has purchased more than 11% of the shares at an average rate of Rs. 113. So the difference works out to be Rs.187. An investment return of about 150% with in 4 months.

Leave A Reply

Your email address will not be published.