Who is interested to buy Satyam?

Who is interested to buy Satyam?

Satyam's board member Tarun Das said recently that six to seven companies were interested in taking over the software firm.

The initial enthusiasm of a few of the original contenders have dimmed somewhat. Here's a snapshot of the likely bidders.

Larsen & Toubro

Engineering and construction giant Larsen and Toubro, which acquired a 12 per cent stake in Satyam, is seen as the most aggressive suitor for the troubled IT firm.

L&T, in fact, has been the only firm to have categorically expressed its interest to the government in acquiring management control. It has invested around Rs 670 crore (Rs 6.7 billion) in the company so far.

However, that enthusiasm seems to have taken a knock, with L&T chairman and managing director A M Naik telling reporters in Mumbai recently that many things had changed in the last few weeks: some key clients had moved out and some key employees had also left.

L&T, however, still sees a lot of synergy between the core strengths of the beleaguered software giant with that of L&T Infotech.

"Satyam has a huge focus in the enterprise application space and the engineering segment. These two complement L&T Infotech as a large chunk of their work also comes from ERP practice," added the banker.

Spice Group

The Spice Group, too, has expressed interest to invest around Rs 2,000 crore (Rs 20 billion) in Satyam, and wants to buy a 51 per cent stake.

B K Modi, chairman of Spice Group, told Business Standard that his company "is close to appointing a consultant to advise on the bid".

He said he believed that Satyam had only 43,000 employees, adding that if he won the bid, he "will change the brand name of Satyam".

The new name, however, might still start with an 'S'. Modi estimates the liability from the 13 class actions suits would range between $440-840 million (around Rs 2,200-4,200 crore) but adds that "I will contest these suits".

Tech Mahindra

Another strong contender is the Mahindra and Mahindra group's IT business Tech Mahindra.

"For Tech Mahindra this will be a good diversification strategy as it is too dependent on one sector that is telecom and one client," said an analyst.

However, the biggest concern for Tech Mahindra is the liabilities. Besides there is a growing concern among the management of the company on the constant news that some or the other top clients of Satyam have left.

Deepak Parekh, member of the Satyam board, is also on the board of Mahindra and Mahindra since 1990.

If Tech Mahindra decides to bid, it could raise the concern of transparency and corporate governance unless he steps down from the Mahindra boards, opines Haresh Ganatra, SC Advocate, Ganatra & Co.

HCL Technologies

The Delhi-based IT services provider is also being considered as an eligible candidate for acquiring Satyam.

But an analyst said acquiring yet another firm, that too with a headcount of above 50,000, could be a stretch for the firm.

HCL Tech has cash and cash equivalent of $146 million and treasury investments $270.1 million.

Analysts said that though Satyam would increase HCL's scale and size, its capabilities were similar to HCL Axon's to a certain extent and that would not be complementing HCL's existing capabilities.

"Satyam will not bring in any new capability for HCL. Besides there are chances of overlap and redundancies," said an analyst.

Genpact

A leading player in the BPO segment, Genpact is another firm that is looking at acquiring Satyam to increase its presence in the IT services segment.

However, analysts and bankers are not too sure about the synergies as well as the possibility of the firm in the race. Genpact has cash on hand worth $385 million.

However, experts said the acquisition would be of value if Genpact could integrate Satyam's IT solutions with its BPO business.

Hinduja Group

Hinduja Global Solutions, the business process outsourcing arm of the Hinduja Group with an estimated worldwide revenue of $10 billion, is the next big suitor in the acquisition race.

"From what we have heard, while the group has submitted interest for the full operations of the company, it is more interested in the BPO operations of Satyam. But the management bandwidth needed to run an IT services firm is clearly missing," said an analyst.

The BPO has over 80 clients as on December 31, 2008 and a cash reserve of Rs 490 crore (Rs 4.9 billion) as on March 31, 2008.

Essar

Essar Group's IT business arm Aegis Ltd is another firm interested in Satyam's BPO business. When contacted, the company said it would not like to comment.

"As far as Aegis is concerned, the group is interested in acquiring the BPO operations. The focus for the company has been to grow in the BPO business," said a source close to the company. Satyam chairman Kiran Kiran, however, has ruled out sale of parts of Satyam.

iGate

Satyam has lost its value with customers moving out of the company, according to Phaneesh Murthy, chief executive of the US-based iGate Corporation.

"The process has taken time, customers have moved out and Satyam has lost its value. We have lost interest in buying the company," Murthy said.