L&T sees synergy with Satyam, but won't invest now

Larsen & Toubro, which is now one of the largest shareholders of Satyam with a 4 per cent stake, sees a lot of synergy between the core strengths of the beleaguered software giant with that of L&T Infotech, its unlisted information technology subsidiary.

However, the company is not willing to increase its presence in Satyam till the visibility on the software service company’s financials improves. It is open to joining a management committee in case the government decides to set up one to oversee the affairs of the company till a new management takes over, sources familiar with the developments said.

When contacted, Y M Deosthalee, L&T’s finance director, said “Satyam’s strength in the SAP space was an area of interest for us” – a reason why L&T Capital, a group subsidiary was picking up shares from the open market till recently. The investments made good business sense at that point as the prices looked reasonable.

Satyam is the strongest player among Indian IT companies in the SAP space, which accounts for almost 45 per cent of its stated revenues. The company had earlier set itself the target of emerging as the world’s second largest SAP implementer by the end of this year.

Deosthalee, however, said the company is now stuck with the investments as the share prices have crashed, but would not sell or buy any shares till a clear picture on the numbers emerges.

“We didn’t buy or sell any shares on Wednesday as reported by some sections of the media, nor do we intend to do anything till the visibility about Satyam becomes clearer,” Deosthalee said, adding it doesn’t make sense to sell Satyam shares at such ridiculously low prices.

“We were bullish on Satyam, but all that has changed following the startling disclosures on its actual financial position. Earlier, the idea was to get into some kind of a strategic alliance with Satyam,” Deosthalee said.

However, he "doesn't know now whether Satyam is worth buying” as the numbers were fudged. “We can consider whether Satyam can be salvaged only after the liabilities and the lawsuits are taken out,” he said, adding the true value of Satyam can be discovered over several weeks after taking into account all the liabilities. 

While Deosthalee did not comment further, sources within L&T said, “At this point, Satyam is a dangerous company to deal with. We feel scared as no one knows what’s going on. I can categorically say we have no plans to invest more in the company.”

The sources said several merchant bankers have sounded out the company for a possible merger or buyout, but the company has evinced no interest in view of the disclosures made by Raju on inflated profits.

Following L&T’s stand, Satyam’s dire status looks even more desperate as the company revealed yesterday that it was strapped for cash and the management is scrambling to assess its finances.