Satyam may opt for a merger

The promoters of Satyam Computer Services are now reported to be considering a merger with another software company, with HCL Technologies and MindTree being mentioned as strong possibilities.

Of the two, HCL, which closed its last financial year in June 2008 with an operating income of Rs4,615.39 crore and operating profit Rs1,226.96 crore, is said to have been identified as the forerunner. The HCL group boasts of a strength of 58,000 employees.

MindTree Consulting, on the other hand as unequivocally denied any interest in Satyam, saying, ''The is no truth in the report and MindTree completely denies the statements made in them.''
 
There have been several unconfirmed reports of a possible buyout as the institutional investors seem keen on removing founder and chairman B Ramalinga Raju from the management of the company, while other unconfirmed market reports say that Raju is being supported by L&T Finance and Anil Ambani.

In the meanwhile the Satyam management has been busy reassuring its clients asserting that it had not lost control of the company and is focused on its core business area. The management has also written an internal memo to its employees asking them to keep faith in the management and support it in the difficult time.

The company today released a press notice citing a report by Forrester Research ''India: The Innovation Giant Awakens'', released on 18 December 2008, highlights Satyam's innovation programmes.

The company had warned the stock exchanges earlier in a filing last week that stated, "Satyam has received a communication from the promoters that all their shares in the company held by SRSR Holding Pvt Ltd were pledged with institutional lenders over a period of time since September 2006. It is possible that some of the lenders may exercise or may have exercised their option to liquidate such quantum of shares at their discretion to cover the margin shortfall. This would consequently dilute the promoters' holding in the company." (See: Satyam promoters ousted?) 

There were several unconfirmed reports about how much the promoter's stake could have fallen from the level of 8.6 per cent. However, it is clear that Rajus' stake is still above 2 per cent as he would hae been forced to make a mandatory disclosure.

Some quick facts

• Satyam currently holding Rs5,361 crore as cash and cash equivalent in balance sheet
• Satyam lost 50 per cent in share value over December, gaining back some in the last couple of days. The net detoriation of value lies around 23 per cent currently
• Satyam trading nearly 50 per cent discount of Infosys on one year forward multiple
• As of Sept 30, 2008 Satyam has networth of Rs8,368 crore
• The company's goodwill is valued at Rs.340 crore
• Satyam has around 50,000 employees