If Tech Mahindra decides to bid, it could raise concerns over transparency and corporate governance, unless he steps down from the Mahindra boards, opines Haresh Ganatra, Supreme Court advocate, Ganatra & Co.

Tech Mahindra stock was up 2 per cent at the start of the trading day and touched an intra-day high of 5 per cent. The stock closed at the same price as the previous day, at Rs 263.50. L&T was up 2.53 per cent and closed at Rs 576 today.

Analyst concerns
Analysts tracking Satyam are not happy. “The process should have been much more transparent. Since there is no clear information on the number of clients who have left or the liabilities, reaching a valuation is getting difficult. It seems Satyam is being sold as a black-box and will get sold at a discounted rate,” said an analyst.

Among the analysts tracking the L&T group and Mahindra, there seems to be growing concern. A recent report by Kotak Institutional Equities states that while L&T has the resources, it will be better if the group uses the money to address the challenges that its core business is facing.

The company, stated the report, had outstanding liquid mutual fund (MF) investments of Rs 4,000 crore at the end of FY200,8 in addition to cash of Rs 1,000 crore and a gross debt-equity of 0.4. “But we believe such resources are better utilised towards the core business, which may see increase in working capital requirements with slowdown in the broad economy, and could consume almost half the liquid resources visible at the end of FY08,” said the report.

However, experts tracking the group feel it’s not about the resources but whether L&T should focus on its core business or diversify into a new business without shareholder approval.

On who is the best suitor for Satyam, experts are divided between Tech Mahindra and L&T. “Both firms do not have the management bandwidth for Satyam. Perhaps, L&T can do a better job, as it has an experienced person in charge.

If you look at Tech Mahindra, this will be one of the best chances for the company to diversify. In terms of revenue, perhaps Satyam and Tech Mahindra could be comparable (since clients contributing $200-$300 million have left) but in terms of the employee numbers, it will be huge,” said another analyst.

Source: Business Standard