Satyam - Who will buy it ?

B K Modi

> Received Rs 2,191 cr from sale of Spice Communication

> Can bid at Rs 40 per share

> Will cost him Rs 1986 cr

Tech Mahindra

> Cash on books at Rs 4000 cr

> Can bid for Satyam till Rs 80 per share

> Will cost it Rs 3972 cr

L&T

> Cash on books at Rs 964 cr

> Investments in mutual funds at Rs 6800 cr

> Investable surplus of over Rs 7500 cr

> Can bid up to Rs 140 / share

> Will cost it Rs 6951 cr

> Total equity, post 31% offer at 97.36 cr shares

> Suitor will have to buy 51% ie 49.65 cr shares

Projected cost of acquisition

At Rs 40 Rs 1986.14

At Rs 50 Rs 2482.68

At Rs 60 Rs 2979.22

At Rs 70 Rs 3475.75

At Rs 75 Rs 3724.02

At Rs 80 Rs 3972.29

At Rs 140 Rs 6951.50

Who will buy it and why?

Tech Mahindra

Interest in Satyam driven by strategy to form a telecom industry focused IT firm to full-fledged IT service company

Only one client of Tech Mahindra contributes 60% of revenue

No overlap in biz vertical, Tech Mahindra get 100% revenue from telecom vertical

Report of BT planning to sale stake, assured revenue of $2 bn may be in trouble

L&T Infotech

Reverse merger or takeover will provide back door entry to the stock exchange

Reverse merger will bring down long and complex procedure of listing

During tough environment, globally, financially sound companies take the reverse merger route to list

For the last three years, L&T Infotech has been trying to list on the bourses

Will save 1-2% of IPO expenses

Operational synergies

Scale up business to almost four times the current size

Analysts say L&T will post revenues of Rs 2000 cr in FY2009

Post acquistion of Satyam, it will become $2.65 billion from the $400 million currently

Vertical Synergies

Consolidate its strength in manufacturing through Satyam’s ERP practice

L&T Infotech derives 34% of manufacturing vertical, Satyam nearly 24%

Forrester says Satyam frittered away advantage of SAP practice due to fraud

Nearly 42-43% of Satyam’s revenue derives from ERP practice

Satyam’s ERP practice and L&T’s manufacturing focus will increase billing rate significantly

Exposure to financial service vertical through Satyam. L&T has been striving this for long

Post scandal, Satyam employees in ERP verticals are the only ones in high demand

Expertise in ERP solution would be a useful springboard of growth

About L&T Infotech

Set up 1997, over 10,000 employees

Contributes nearly 6.3% to L&T’s consolidated profit and loss account

Caters to clients like Hitachi, Lafarge, Chevron and BPCL

via UTVi.com