Ashish Dhavan of Chrys Capital appears on NDTV Profit and calls Larsen Courageous for it’s aggressive pursuit of Satyam!… Really Ashish!?

Knowing  how Ashish Dhawan, of Chrys Capital,cornered Suzlon shares (even became it’s Director !), with Ajay Relan of Citicorp as an ally and later sold off  some part to Government of Singapore… all at a dirt cheap placement price and all done before the Suzlon IPO, I was not really surprised at what he just came and said on NDTV Profit today on Larsen’s Bid for Satyam… I had blogged earlier on these Suzlon placements… Check out http://www.gauravblog.com/?p=393 

Ashish Dhavan thinks Larsen is courageous in aggressively pursuing Satyam when all others are concerned with the risks !… Ashish,should we not be concerned with the risks !,especially when they are clearly in the high risk category ?… or, like you possibly had in Suzlon, and in your gameplan, made a killing of Thousands of Crores at the expense, I daresay, of Indian Investors, do you too, like perhaps Larsen does, have some price sensitive Inormation on Satyam’s contingent liabilities, that we do not !?… On what basis are you defending Mr A M Naik and Larsen in their bid for Satyam !?… they’re, in all probability, merely trying to save face on a ‘mistake’, probably by making another one ! 

Is Larsen Courageous or Foolish in increasing it’s stake to 12% in Satyam? Check an earlier blog on this.

What a call !… Should you be Buying or Selling Larsen and Satyam !?

I have been receiving serious queries from friends, relatives, acquaintances, clients and associates on Satyam and Larsen…. In light of what has happened and is happening and will happen should we Buy, Sell or Hold Shares of these two Companies !?

Really Ironic and Amusing that as Larsen averages a rising Satyam to save face and reduce it’s high holding cost, you want to average a falling Larsen for the same reasons !

Let’s take one Company at a Time

SATYAM

Along with it’s Promoter,Ramalinga Raju,Satyam’s Share Price too fell from Grace to levels of Rs 15 from Rs 225 in mid December… It’s been rising since, to Rs 52 today, as Larsen keeps making a strong pitch to buying it out and has already committed Rs 600 crores for a 12% Equity Stake

I had strongly warned you to sell off Satyam in my Dec 17, 2008 Blog at Rs 162 just a day after the Maytas proposal was announced by the Satyam Board and withdrawn overnight… stating that the share price will sink further and that Ramalinga Raju was a Goner !… This was much before he made his confession on January 7, 2009 

At Rs 52, Satyam is reviving with Larsen support… If you wish to Hold or are even contemplating Buying Into Satyam, then be cautioned that you have to take the risk like Larsen is doing, in assessing that Satyam will bounce back and the Hundreds of Millions of Dollars of Contingent Liability on account of Class Action Law Suits in USA  will not materialise… Larsen seems confident… I don’t… Maybe they know something I don’t… refer to earlier Satyam and Larsen blogs for more on this !

So would I sell Satyam at Rs 52… At Rs 15, I would have taken the risk to Hold but now at Rs 52, I would begin offloading in tranches… but then again my risk profile may not be yours and you may be willing to take the Risk that Larsen is taking by Investing in Satyam

LARSEN & TOUBRO

It’s ,without any doubt,India’s Super Icon of Success and Scale…Of course it should be in your Equity portfolio

Problem is that most of you already hold this Share at a high Holding Cost of nearly Rs 2000… In the macro meltdown in 2008, Larsen had sunk towards Rs 800… However after it disclosed that it had purchased 3.95% Equity Stake in Satyam between December 23, 2008 and January 6, 2009 at an average of Rs 174 and after the Maytas Proposal Fiasco, It’s Share Price has sunk to below Rs 650 as market and shareholders clearly disapproved of this continuing ‘Mistake’ of Investing in Satyam. read more

Larsen’s CMD, Mr A M Naik tries to justify increasing stake to 12% in Satyam

This is a gist of the Conference call that Larsen organised today to justify and clarify the 12% stake in Satyam

  • L&T management clearly stated that L&T is no longer just an E&C company. It’s businesses span a range of activities in manufacturing as well as services, including heavy engineering, manufacturing,  power, process engineering and financial, IT and engineering services.
  •  L&T Infotech, with revenues of US$400mn in FY08, has been in the IT services business for 10 years and hence, the acquisition of a stake in Satyam is not an unrelated diversification for L&T.
  • L&T acquired the 1st tranche of 3.95% stake in Satyam after the announcement and subsequent cancellation of the proposed acquisition of Maytas Infra and Maytas Properties by Satyam, but before the news of fraud by Ramalinga Raju was announced. The average market price of Satyam at which the stake was acquired was Rs 174/share.
  • The 2nd round of acquisition of ~8.09% was completed on January 23, 2009 at an average price of Rs 34.share. L&T now holds a 12.04% stake in Satyam, at an average price of Rs80/share.
  • The initial stake was acquired with an intention to form a strategic alliance with Satyam for targeting clients jointly, especially in areas where L&T Infotech and Satyam were competitors.
  • On disclosure of the fraud by the ex-Chairman of Satyam, L&T decided to increase its stake with a view to preserve the value of the already acquired stake and to have a say in any major action the new Board of Satyam would decide about the company’s future
  • L&T’s decision to acquire the additional stake was based on its assessment (and feedback from various stakeholders in Satyam) of Satyam’s demonstrated track record, trained manpower and valuable client relationships.
  • L&T believes that major clients are unlikely to terminate contracts for two reasons – one, most clients are satisfied with Satyam’s services and would likely continue if issues of governance etc are addressed wby the new Board and two, the prohibitive costs of transition to new vendors.
  • L&T’s decision to increase its stake was also in part, influenced by the knowledge gained that Satyam did not have any debt on its books and all its properties were mortgage free and that Satyam has in its possession, 250 acres of land with clear titles.
  • On potential/contingent liabilities, L&T management is reasonably confident of no material impact of the UPaid case on Satyam. However, the management is yet to assess the impact, if at all, the class action suits filed against Satyam in the USA.
  • L&T has acquired the 12.04% stake in Satyam through L&T Capital, which is the designated vehicle for acquisition of all such strategic stakes.
  • The other strategic acquisitions made by the company in the recent past include NIIT Technologies (~5% stake to access markets in Europe where NIIT has a strong presence) and Kalindee Rail Nirman Engineers (~14.5%, to leverage Kalindee’s capabilities in EPC and allied services for Railways).
  • The management clarified that the Satyam acquisition, being strategic in nature, L&T Capital will not be providing for any MTM losses in its books.
     
  • read more

    Is Larsen courageous or foolish to hike Satyam Stake to 12%!?

    Just two days ago,on January 22,2009,I blogged that Larsen, to save itself, is trying to save Satyam..I had opined that it would be foolish to spend an additional @ Rs 1000 crs to take a controlling stake unless some protection was provided from contingent liabilities of the class action law suits in USA which could materilaise into hundreds of millions of dollars of Liability

    And what does Mr A M Naik,CMD of Larsen do !?…Yesterday,he goes and raises Larsen’s stake in Satyam to 12%…39 million shares were purchased on the NSE at Rs 34.52 per share,aggregating Rs 134.73 crs and another 12 million shares were obtained at Rs 35.07 per share on th BSE,aggregating @ Rs 42 crs….So that’s another Rs 177 crs spend on Satyam Shares

    This brings down the Larsen’s Average Holding cost per Satyam Share to Rs 80 from the earlier Rs 157… The total exposure is now over Rs 600 crs

    So why did Mr Naik do this !?…After canvassing for political support for his Buy-Out Bid of Satyam,does he know something we don’t ? Is there some assurance or some tacit understanding between him and the government that some protection will be provided to insulate the Acquirer of Satyam from being exposed to the Contingent Liabilities of Hundreds of Millions of Dollars !…Would this not then be Insider Trading !?

    This could explain his courage…otherwise unless there is clarity on protection from the contingent liabilities,it is foolish to buy More into Satyam

    A Larsen Spokesman stated that the idea of rasing the stake was to average the Holding Cost and to strengthen it’s position to influence the Satyam Board….Real Reasons could well be to pre-empt any other Bids for Satyam as well as some prior understanding as spelled out above.

    Shareholders have not taken it kindly and Larsen’s Share Price has dropped to Rs sub Rs 650 levels

    If it purchases another Two Million Shares or 3% in Satyam to take it’s stake to 15%, Larsen will trigger the mandatory Open Offer to acquire atleast another 20% of Satyam’s equity from the Shareholders..that’s another 134 million shares…As per SEBI Formula the Offer has to be at the Highest of several Price parameters,which include the highest price it has paid to acquire Satyam…I believe this to be Rs 167…Therefore Larsen will have to shell out over Rs 2200 crs to acquire these 134 million shares….Surely it must be mad !

    Media Reports suggest they have approached,or will approach SEBI to waive this Open Offer or allow the Offer Price adjustment to current Market Price of Satyam of @ Rs 40,at which Larsen will have to shell out only another Rs 536 crs for the Open Offer…..Even then the Exposure of Larsen would be close to Rs 1200 crs for a 35% quity stake…otherwise it would have been @ Rs 3000 crs read more

    Larsen Desperate to Save Satyam !..to save itself !

    On January 9,2009 I had blogged that Larsen has jumped the Gun in Investing in Satyam and has lost over 85% and over Rs 300 crs in just two days after Ramalinga Raju’s confession on January 7,2009

    Check it out again.Click on http://www.gauravblog.com/?p=431

    I had even suggested a possibility that Larsen had picked up the Satyam Promoters pledged shares sold by Lenders…and perhaps Ramalinga Raju awaited this sale before making the Confession

    A response to this blog that there could be a possibility that one of the Lenders was related to one of the Directors of Larsen and this Lender was bailed out by Larsen Monies by buying out their Pledged Shares got me thinking

    I checked the Larsen & Toubro Annual Report and found that the Whole Time Director & Senior Executive Vice President and CIO in charge of IT and Technology Services is one Mr V K Magapu….Larsen’s Investment of over Rs 400 crs by purchasing 2.69 cr shares to take a 4% Stake in Satyam,even after the Satyam -Maytas Controversy was still burning,despite reversal of the proposal,defies Commonsense and Sanity.As CIO and in charge of IT and Technology Services,Mr Magapu surely must have been involved in recommending this Investment…Why ! ?….On Confession by Ramalinga Raju on January 7,2009,Larsen’s Investment in Satyam eroded over 85% in just two days and Larsen is now sitting on a Notional Loss of over Rs 350 crs !

    Chairman & Managing Director of Larsen & Toubro,Mr A M Naik must have slept well only till the night of January 6,2009….he ‘s been desperately trying to save his Investment in Satyam by offering to buy out Satyam ! He’s galvanising support from Institution shareholders like LIC and even the Ministers and is making a presentation to the New Board of Directors of Satyam today and tomorrow

    What Timing ! Mr Naik just received the ET Business Leader of the Year Award last week and this Satyam Loss !

    Naik needs to explain why did Larsen,perceived by all as being responsible, conservative and risk averse in it’s operations,dare to venture into controversial Satyam by buying shares from December 23,2008 to January 6,2009…Do Vested Interests exist? Also why this turnaround now !? After Ramalinga Raju’s Confession on January 7,2009 Mr Naik came on the business channels to assure that Larsen was merely an Investor in Satyam and had recently got a 4% stake and had no plans to buy it out or increase it’s stake ! read more

    Satyam-Maytas Scam : Revealing Minutes of the crucial December 16,2008 Board Meeting to discuss and approve the acquisition proposal

    The Minutes of the Crucial December 16,2008 Meeting of the Board of Directors of Satyam to discuss and approve the Maytas acqusition proposal are now in public domain

    Phew ! I read the Twelve pages of the Minutes and can only say this !

    NONE IN THE BOARD WAS ABOVE BOARD !

    The way the Meeting Progressed from 4 pm and the nature of the various presentations that were made and the Information and explanations given by Top Management and Working Directors…all actually provide answers to some very vital questions that are being raised on

    • Complicity of Ram Mynampati,President and Whole-Time Director who made a presentation on the need to diversify from just being a core IT Company…His contradictory stance and feigning that he was in the Dark can be countered strongly
    • Complicity of Srinivasu Satti,Head (Mergers and Acquisitions) and who made the presentation to explain and justify the Maytas Proposal…He had to know !
    • Complicity of V Srinivasa,CFO…his justifications,information and explanations were taken at face value by the Independent Directors,when some very very basic queries automatically come to the mind when you hear V Srinivasa….I’m sure Independent Directors too would have had such queries race through their mind…why did they fail to voice them ! ?  
    • Dereliction of Duty and Prior Awareness of Maytas Deal by each and every Independent and Non Executive Director…They failed to raise even basic queries on Structuring,Financing,Leveraging and Valuation of the Deal…Queries that they raised were simply too general and they failed to get into specifics,like they should have
    • Controversial Valuation of Maytas Properties by Ernst & Young and the existence of a Non Disclosure Agreement with them

    I shall endeavour to blog and justify each point above seperately in the days to come