Move Out Of Satyam @ Rs.55-58; Bid Price Low

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The hunt for an acquirer for the fraud-hit Satyam Computer Services Ltd came Satyam’s rise, fall and resurrection to an end on Monday with Tech Mahindra outbidding Satyam’s rise, fall and resurrection competitors at Rs 58 per share. The other contenders Larsen & Toubro and Wilbur Ross bid for Rs 49 per share and Rs 20 per share respectively.

Tech Mahindra will have to pay Rs 1,757 crore to acquire 31% stake in Satyam on offer now, and around Rs 2,890 crore for 51% when it makes an open offer for further 20%. The IT company will have an market cap of Rs 5,666 crore on acquiring the 31% Satyam stake.

“On the business front, the takeover of Satyam by Tech Mahindra is good for both the companies from the long term point of view. The acquisition will help the company, an arm of the Mahindra & Mahindra Group, to diversify into new areas instead of just depending on the telecom sector. Currently British Telecom is one of the major sources of revenue for Tech Mahindra,” said Siddharth Bhamre, fund manager at Angel Broking.

“On the stock price front, we have already advised players to move out of the Satyam stock at around Rs 55-58 levels. We were expecting the bid to take place at Rs 70-80 per share but as the bid took place below expectations, we are booking profits in the stock. Intraday, Sataym touched a high of Rs 56 where I expect players must have booked profits as the pricing has already reach the higher levels,” Bhamre added further.

The Satyam acquisition will help Tech Mahindra diversify its software services business, and compete aggressively with bigger rivals such as Tata Consultancy Services, IBM, Infosys Technologies and Wipro. The major clients of Satyam include Qantas Airways, Telstra and ANZ Bank.

Satyam has a 46,600-strong work force, land assets of Rs 450 crore, besides the order book. Its liabilities include the legal liabilities arising out of the class action suits filed by shareholders in the US, and any liability arising out of the tussle with UK based mobile payments services provider Upaid.

A Satyam employee said on conditions of anonymity: “Satyam’s portfolio is better than any other who was there in the bidding process. There was heavy speculation among the employees and I also personally felt that IBM should have been there. However, the good thing is that it went into the hand of an IT player which is soothing us in the period of uncertainty.”

On Satyam’s future prospects, Bhamre said, “We have to wait and watch as to how Tech Mahindra is going to manage the acquisition. Satyam has about 46,000 employees, so it is also important to watch how the acquirer will deal with the workforce especially in the current period of downturn.”

Monday on NSE, the Satyam Computer stock closed 3.17 per cent higher at Rs 48.75. Intraday, the stock touched a high of Rs 56 and low of Rs 47.20. Tech Mahindra ended higher by Rs 358.35, after touching a high of Rs 410 earlier. The stock gained 11.86% over the previous close.


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