Who will end up with Satyam in its fold?

With the bidding process of Satyam gaining momentum, till now it seems that there are just 3 players vying for the company, that are L&T Infotech, Tech Mahindra and Spice Corp.

Other IT Indian majors like HCL Tech, Wipro, Infosys and international players such as IBM, HP, Oracle and Cognizant seems to have stayed away from the bidding process maybe due to the lack of clarity on Satyam’s financial position and legal liabilities.

Satyam’s m-cap stands at over Rs.3000 crore and the board may sell around 51% stake, thus giving a precondition that the bidder must show Rs.1500 crore cash at disposal to buy the stake.

So the competition boils down among the 3 players with each having their own requirements and strategic aim to buy Satyam.

Spice Corp. is owned by BK Modi, who few months back sold his telecom firm Spice Communications to Idea Cellular for Rs2191 crore. But it is difficult to interpret the synergies which he will derive by buying Satyam and can only succeed at a lower bid price.

Tech Mahindra has surplus cash of Rs.4000 crore which can help the company in bidding at Rs.80 per share.  It would also help the company in diversifying its business into other sectors since currently it gets 100% revenues from telecom only of which 60% is contributed just by British Telecom alone.

The third suitor is L&T Infotech, backed by the strength of its parent company and huge piles of investments and surplus. So it can be highly expected that it would be the most aggressive bidder for Satyam.

L&T already holds around 12% in Satyam and its intentions are well in public domain. It would also garner synergies by using the ERP and manufacturing vertical business of Satyam and integrate with existing business.

L&T Infotech could also then go for a reverse merger with Satyam and list the company without much efforts and costs, and also become a much larger infotech company then.