Showing posts with label Satyam. Show all posts
Showing posts with label Satyam. Show all posts
Friday, April 24, 2009
Fidelity reduces stake in Satyam Computer to 6.47 pc
Foreign fund house Fidelity has offloaded 12 crore shares of the beleaguered IT firm Satyam Computer through open market transactions. In a disclosure on the National Stock Exchange, Satyam said Fidelity through its direct and indirect arms sold 12 crore shares representing 1.78 per cent stake of the company. Post sale, foreign fund Fidelity now holds 6.47 per cent stake in the company that is over 4.35 crore shares of Satyam Computer. The transaction was worth Rs 54.24 crore as calculated on the basis of Satyam's closing market price on April 6 (the date of sale). At the end of March quarter, Fidelity through its arms -- the Fidelity Diversified International Fund and the Fid Funds (Mauritius) Ltd -- held 8.71 per cent stake in the company. Yesterday, IT firm Tech Mahindra has said its Rs 1,154.66- crore open offer for an additional 20 per cent stake at Rs 58 a share in Satyam Computer would begin on June 12 and close on July 1, 2009. Tech Mahindra has proposed to the additional 20 per cent in Satyam at Rs 58 per share. Tech Mahindra is set to acquire 31 per cent stake in Satyam Computer Services at a price of Rs 58 a share. Pursuant to successful completion of the open offer, Tech Mahindra's holding in Satyam would go up to 51 per cent. Last week, Tech Mahindra had outbid others in the race to acquire a controlling stake in tainted Satyam.
Wednesday, April 15, 2009
Fresh controversy. ICAI disappointed over Satyam stake sale
Apex accounting body ICAI on Wednesday said it is “disappointed” over the manner in which the deal to acquire scam-tainted Satyam Computer Services by Tech Mahindra was announced even before the IT major’s accounts were restated. “I am totally disappointed (over the deal). I am unable to understand how they (the authorities at Satyam) decided the value of Satyam before its accounts were restated,” Institute of Chartered Accountants of India (ICAI) president Uttam Prakash Agarwal said here. “Today, such a large deal has taken place without finalising the accounts and assessing the current valuation (of Satyam). This is speculative activity,” he said.
Tech Mahindra emerged as a winner in the race to acquire the Hyderabad-based company with the highest bid price of Rs58 per share. The IT firm, led by Anand Mahindra, would have to shell out about Rs2,889 crore to acquire a 51% stake in the fraud-hit company. Agarwal said when the Satyam scam surfaced in January, people said that shareholders lost money because the books of accounts were not audited properly by chartered accountants. He said the two sacked Price Waterhouse chartered accountants involved in Satyam’s auditing should not be blamed as they got incorrect statements from the company. “Whenever something goes wrong with a company’s accounts, the chartered accountants (are blamed). It is a gameplan of the management,” Agarwal said.
Tech Mahindra emerged as a winner in the race to acquire the Hyderabad-based company with the highest bid price of Rs58 per share. The IT firm, led by Anand Mahindra, would have to shell out about Rs2,889 crore to acquire a 51% stake in the fraud-hit company. Agarwal said when the Satyam scam surfaced in January, people said that shareholders lost money because the books of accounts were not audited properly by chartered accountants. He said the two sacked Price Waterhouse chartered accountants involved in Satyam’s auditing should not be blamed as they got incorrect statements from the company. “Whenever something goes wrong with a company’s accounts, the chartered accountants (are blamed). It is a gameplan of the management,” Agarwal said.
STREET VIEW: Tech Mahindra - Satyam deal
We present to you the views of different analysts across brokerage houses.
Citigroup – Wait for clarity
Lots of unknowns — Satyam’s financial details are not known at this point in time. Without knowing the same, it is difficult to assess the impact of the deal on TechM. The restatement of accounts is going to take a few more months.
What does it mean for TechM? — (1) TechM will become a scale player (total revenues of ~$2.3b) with diversified revenue base. (2) If the acquisition is fully debt funded, it could take TechM’s net debt to ~Rs. 22b. (3) Satyam is facing about a dozen class action lawsuits in the US plus the ongoing legal battle with Upaid – difficult to value the liabilities though.
Wait for clarity — We await details on Satyam’s financials. Lots of unknowns, client confidence issues, execution challenges and liabilities (Upaid and class action suits) increase the risk profile of Tech Mahindra, as a stock.
Deutsche Bank – Long-term positive
Acquisition of stake in Satyam: Diversifying Tech Mahindra’s risks: We believe Tech Mahindra's acquisition of a controlling stake in Satyam Computers will enable it to diversify its risks. Although Tech Mahindra has leveraged its B/S and become perhaps the most geared IT services company in the world, we believe Satyam's diversified service and client base will allow it to diversify risks away from the beleaguered telecom vertical and the volatile revenues from BT, its top client. We believe the share price already reflects concerns on the leveraged B/S and revenue volatility from BT; we reiterate Buy.
Poised to break into the big league of Indian IT service providers
We believe Tech Mahindra’s impending acquisition of a controlling stake in Satyam is a step in the right direction. The biggest positive for Tech Mahindra is diversification of its revenues in terms of clients, geography and service lines. A heavily leveraged balance sheet (net D/E ratio of 1:1) means Tech Mahindra may need to arrange for an equity partner in the near future. We expect the Satyam deal would be EPS accretive from its first year; however, this assumption could be affected by the outcome of the various lawsuits facing Satyam.
BofA - Merill Lynch: Positive, wait for clarity
We believe the Satyam acquisition would help diversify its exposure beyond telecom services providers and reduce concentration of top client (BT) from current 60% to ~25% post acquisition. TML currently address only the telecom services domain and is one of the largest vendors for BT globally. TML would also emerge as the fourth largest listed offshore service provider from India. Expect stock to re rate on revenue diversification and scale.
Given no data on Satyam revenues and possible liability from class action suits, we have done simplistic scenario analysis based on Satyam employees and possible civil suit liabilities, which indicates flattish to -7% decline in EPS impact for TML post consolidation. Key risks stem from quantum of liability from US civil suits and integration risks
Scenario analysis given below
Lots of unknowns — Satyam’s financial details are not known at this point in time. Without knowing the same, it is difficult to assess the impact of the deal on TechM. The restatement of accounts is going to take a few more months.
What does it mean for TechM? — (1) TechM will become a scale player (total revenues of ~$2.3b) with diversified revenue base. (2) If the acquisition is fully debt funded, it could take TechM’s net debt to ~Rs. 22b. (3) Satyam is facing about a dozen class action lawsuits in the US plus the ongoing legal battle with Upaid – difficult to value the liabilities though.
Wait for clarity — We await details on Satyam’s financials. Lots of unknowns, client confidence issues, execution challenges and liabilities (Upaid and class action suits) increase the risk profile of Tech Mahindra, as a stock.
Deutsche Bank – Long-term positive
Acquisition of stake in Satyam: Diversifying Tech Mahindra’s risks: We believe Tech Mahindra's acquisition of a controlling stake in Satyam Computers will enable it to diversify its risks. Although Tech Mahindra has leveraged its B/S and become perhaps the most geared IT services company in the world, we believe Satyam's diversified service and client base will allow it to diversify risks away from the beleaguered telecom vertical and the volatile revenues from BT, its top client. We believe the share price already reflects concerns on the leveraged B/S and revenue volatility from BT; we reiterate Buy.
Poised to break into the big league of Indian IT service providers
We believe Tech Mahindra’s impending acquisition of a controlling stake in Satyam is a step in the right direction. The biggest positive for Tech Mahindra is diversification of its revenues in terms of clients, geography and service lines. A heavily leveraged balance sheet (net D/E ratio of 1:1) means Tech Mahindra may need to arrange for an equity partner in the near future. We expect the Satyam deal would be EPS accretive from its first year; however, this assumption could be affected by the outcome of the various lawsuits facing Satyam.
BofA - Merill Lynch: Positive, wait for clarity
We believe the Satyam acquisition would help diversify its exposure beyond telecom services providers and reduce concentration of top client (BT) from current 60% to ~25% post acquisition. TML currently address only the telecom services domain and is one of the largest vendors for BT globally. TML would also emerge as the fourth largest listed offshore service provider from India. Expect stock to re rate on revenue diversification and scale.
Given no data on Satyam revenues and possible liability from class action suits, we have done simplistic scenario analysis based on Satyam employees and possible civil suit liabilities, which indicates flattish to -7% decline in EPS impact for TML post consolidation. Key risks stem from quantum of liability from US civil suits and integration risks
Scenario analysis given below
L&T not to dilute holding in Satyam
Engineering major L&T today said it will not dilute stake in IT major Satyam, where it lost the race to Tech Mahindra for 31 per cent strategic holding, and exuded confidence that the new owner of the Hyderabad-based giant would add value for shareholders.
We are not disappointed with the outcome," a top official of the engineering giant told PTI when asked for comments on the company losing out to Tech Mahindra for acquiring Satyam.
"We expect that the new owner (the successful bidder Tech Mahindra) will increase the value of the enterprise and consequently an increase in the value of our holdings," D Morada, L&T General Manager, told PTI. Asked about the 12 per cent holding in Satyam, he said "We are not permitted to buy or sell Satyam equity for a period of six months ... This condition applies to all bidders." The official said that the company would not have gone overboard on the bidding for Satyam where Tech Mahindra emerged successful with an offer of Rs 58 a share, saying, "We bid what we thought was the fair value for the enterprise." L&T, which accumulated its holding to 12 per cent ahead of race, had offered Rs 45.90 a share. It was expected that the value of enterprise, as seen by the bidders, would vary considerably in view of the assessment that had to be made on the basis on incomplete information.
Tuesday, April 14, 2009
TechMahindra - Satyam deal - Why there is wide divergence in the bids
Tech Mahindra - Rs58/share - Winner
L&T - Rs45.9/share
WL - Rs20/share
The wide variation in the bid prices submitted by the three contenders for Satyam Computer Services has set off a debate on whether this could be due to the several “unknowns” with respect to Satyam (whose accounts are yet to be restated), or due to the varying priorities of the bidders themselves. The highest bid, from Tech Mahindra, was for Rs 58 a share; the second highest, from L&T, was 21 per cent lower, at Rs 45.90. The third bid, by WL Ross, was way lower at Rs 20 a share.
“Acquisition transactions are based on assumptions and there are assumptions with reference to the future, customers, employees, lawsuits… there are so many variables. And considering the past of this company, it becomes somewhat difficult to make these assumptions and make judgment calls. I guess that is the main issue,” said Mr Y.M. Deosthalee, Chief Financial Officer of L&T.
When the number of bidders is very low, it boils down to quoting the lowest price that you can get away with. Had there been more bidders, one would not have such a huge divergence, say merchant bankers. As for WL Ross and Co’s low bid, this was in line with their profile as a distress buyer globally, bidding at very low prices in the hope of a bargain buy, an investment banker remarked. However, if one were to discount WL Ross, the divergence between the bidding parties is not very huge, he said.
“This is a very unusual situation; there are different reasons for people to acquire this company,” said independent investment analyst Mr R. Balakrishnan, “The three-year lock-in period appears to have acted as a mind block for some bidders.
“WL Ross’ bid came at a lower price because even though they are a private equity fund, they would have probably liked to flip it over after some time rather than wait for three years.”
Source: BusinessLine
L&T - Rs45.9/share
WL - Rs20/share
The wide variation in the bid prices submitted by the three contenders for Satyam Computer Services has set off a debate on whether this could be due to the several “unknowns” with respect to Satyam (whose accounts are yet to be restated), or due to the varying priorities of the bidders themselves. The highest bid, from Tech Mahindra, was for Rs 58 a share; the second highest, from L&T, was 21 per cent lower, at Rs 45.90. The third bid, by WL Ross, was way lower at Rs 20 a share.
“Acquisition transactions are based on assumptions and there are assumptions with reference to the future, customers, employees, lawsuits… there are so many variables. And considering the past of this company, it becomes somewhat difficult to make these assumptions and make judgment calls. I guess that is the main issue,” said Mr Y.M. Deosthalee, Chief Financial Officer of L&T.
When the number of bidders is very low, it boils down to quoting the lowest price that you can get away with. Had there been more bidders, one would not have such a huge divergence, say merchant bankers. As for WL Ross and Co’s low bid, this was in line with their profile as a distress buyer globally, bidding at very low prices in the hope of a bargain buy, an investment banker remarked. However, if one were to discount WL Ross, the divergence between the bidding parties is not very huge, he said.
“This is a very unusual situation; there are different reasons for people to acquire this company,” said independent investment analyst Mr R. Balakrishnan, “The three-year lock-in period appears to have acted as a mind block for some bidders.
“WL Ross’ bid came at a lower price because even though they are a private equity fund, they would have probably liked to flip it over after some time rather than wait for three years.”
Source: BusinessLine
Monday, April 13, 2009
Tech Mahindra wins bid for Satyam Computers
IT services provider Tech Mahindra is the new owner of Satyam Computer Services. The company bid the highest at Rs 58 per share, pipping Satyam Saga: Rise, fall and resurrection rivals engineering firm Larsen & Toubro and billionaire investor Wilbur Ross to the post.
According to sources who requested anonymity, engineering firm L&T made an offer of around Rs 49 for each Satyam share.
Tech Mahindra will have to pay Rs 1,757 crore to buy a 31% stake in Satyam Computer Services. The IT co will have a market cap of Rs 5,666 crore on expanded equity. Tech Mahindra will have to pay a total of Rs 2890 crore for 51% stake in Satyam.
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.
The Satyam acquisition will help Tech Mahindra diversify its software services business, and compete aggressively with bigger rivals such as TCS, IBM, Infosys and Wipro.
Satyam, which serves customers such as GE, GM and Ford will also help Tech Mahindra build a better portfolio of customers.
Satyam has a 46,600 strong work force, land assets of 450 crore, besides the order book position. Its liabilities include the legal liabilities arising out of the class action suits filed by shareholders in the US, besides any liability arising out of the tussle with UK based mobile payments services provider Upaid.
According to sources who requested anonymity, engineering firm L&T made an offer of around Rs 49 for each Satyam share.
Tech Mahindra will have to pay Rs 1,757 crore to buy a 31% stake in Satyam Computer Services. The IT co will have a market cap of Rs 5,666 crore on expanded equity. Tech Mahindra will have to pay a total of Rs 2890 crore for 51% stake in Satyam.
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.
The Satyam acquisition will help Tech Mahindra diversify its software services business, and compete aggressively with bigger rivals such as TCS, IBM, Infosys and Wipro.
Satyam, which serves customers such as GE, GM and Ford will also help Tech Mahindra build a better portfolio of customers.
Satyam has a 46,600 strong work force, land assets of 450 crore, besides the order book position. Its liabilities include the legal liabilities arising out of the class action suits filed by shareholders in the US, besides any liability arising out of the tussle with UK based mobile payments services provider Upaid.
Thursday, March 12, 2009
A Dozen Likely Bidders For Satyam; Tech Mahindra Goes Official
At last count, there are more than a dozen likely bidders for Satyam. Only three have confirmed interest, though
With Tech Mahindra officially announcing its interest in Satyam Computer Services, the list of likely bidders for buying a majority stake in the troubled IT company is getting longer everyday. Tech Mahindra has announced today in a BSE filing that it has registered its interest in participating in the bidding process. Today is the last date for submitting Expressions of Interest (EOIs). The company board will meet tomorrow to scrutinise the EOIs submitted by the potential bidders.
The Hinduja Group, which was also a likely bidder for a majority stake in Satyam, today announced that it is not bidding for the stake in Satyam.
Till now more than a dozen names have come up as contenders for the Hyderabad-based IT company. However, out of these firms only three have confirmed their interest in picking a majority stake in Satyam. Larsen and Toubro (L&T), BK Modi’s Spice group and Tech Mahindra have reportedly submnitted EOIs today.
L&T had recently hiked its stake in Satyam from 4% to 12%, becoming the largest stake holder in the IT firm. Spice Group chairman, BK Modi has said that the group is ready to invest $408 million in Satyam, and would like a preferential issue route to acquire 51% stake in the firm.
Global IT firms Hewlett-Packard (HP) and Computer Sciences Corporation (CSC) are also reportedly considering the possibilities of acquiring a majority stake in Satyam. Another Gobal IT major IBM, which has around $12 billion in cash, was also understood to have shown an interest in acquiring the beleaguered IT firm but has now backed out.
Capegemini, Europe based computer consultancy firm, which was said to have shown interest in buying a stake in Satyam, has said that it has no interest in the fraud hit IT firm. HCL, which had acquired SAP firm Axon last year, was also said to have been keen on acquiring a stake in Satyam.
Recent reports also suggest that private equity firm General Atlantic Partners is also likely to bid for a majority stake in Satyam. The speculation is based on General Atlantic’s track record of investing heavily in India in the IT sector.
Its IT investments in India include Genpact, Patni Computers and Hexaware. There are also possibilities of General Atlantic tying up with Patni to acquire the stake just like Tech Mahinrda’s discussions with private equity funds to mount a joint bid.
It was earlier believed that the Satyam board would be interested in selling a majority stake in the firm to only IT players. Since, the board’s recent announcements have not even touched upon any such points, it has led to speculation about General Atlantic's interest in acquiring a majority stake in the fraud hit IT giant.
Other private equity names that have come up in relation to the Satyam bidding are KKR, TPG, Blackstone and the Carlyle Group.Fidelity, which had recently hiked its stake in Satyam to 7.66% is now the second largest share holder in the firm.
Other names that have been linked to the bid include iGate and the Essar Group. iGate, had last month, announced that it would not bid for Satyam. The lack of clarity about the extent of Satyam’s liabilities may discourage the potential buyers.
With Tech Mahindra officially announcing its interest in Satyam Computer Services, the list of likely bidders for buying a majority stake in the troubled IT company is getting longer everyday. Tech Mahindra has announced today in a BSE filing that it has registered its interest in participating in the bidding process. Today is the last date for submitting Expressions of Interest (EOIs). The company board will meet tomorrow to scrutinise the EOIs submitted by the potential bidders.
The Hinduja Group, which was also a likely bidder for a majority stake in Satyam, today announced that it is not bidding for the stake in Satyam.
Till now more than a dozen names have come up as contenders for the Hyderabad-based IT company. However, out of these firms only three have confirmed their interest in picking a majority stake in Satyam. Larsen and Toubro (L&T), BK Modi’s Spice group and Tech Mahindra have reportedly submnitted EOIs today.
L&T had recently hiked its stake in Satyam from 4% to 12%, becoming the largest stake holder in the IT firm. Spice Group chairman, BK Modi has said that the group is ready to invest $408 million in Satyam, and would like a preferential issue route to acquire 51% stake in the firm.
Global IT firms Hewlett-Packard (HP) and Computer Sciences Corporation (CSC) are also reportedly considering the possibilities of acquiring a majority stake in Satyam. Another Gobal IT major IBM, which has around $12 billion in cash, was also understood to have shown an interest in acquiring the beleaguered IT firm but has now backed out.
Capegemini, Europe based computer consultancy firm, which was said to have shown interest in buying a stake in Satyam, has said that it has no interest in the fraud hit IT firm. HCL, which had acquired SAP firm Axon last year, was also said to have been keen on acquiring a stake in Satyam.
Recent reports also suggest that private equity firm General Atlantic Partners is also likely to bid for a majority stake in Satyam. The speculation is based on General Atlantic’s track record of investing heavily in India in the IT sector.
Its IT investments in India include Genpact, Patni Computers and Hexaware. There are also possibilities of General Atlantic tying up with Patni to acquire the stake just like Tech Mahinrda’s discussions with private equity funds to mount a joint bid.
It was earlier believed that the Satyam board would be interested in selling a majority stake in the firm to only IT players. Since, the board’s recent announcements have not even touched upon any such points, it has led to speculation about General Atlantic's interest in acquiring a majority stake in the fraud hit IT giant.
Other private equity names that have come up in relation to the Satyam bidding are KKR, TPG, Blackstone and the Carlyle Group.Fidelity, which had recently hiked its stake in Satyam to 7.66% is now the second largest share holder in the firm.
Other names that have been linked to the bid include iGate and the Essar Group. iGate, had last month, announced that it would not bid for Satyam. The lack of clarity about the extent of Satyam’s liabilities may discourage the potential buyers.
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