This evening ,it was interesting to view live on Stock Channels,Anand Mahindra,Vineet Nayyar (MD of Tech Mahindra) and Bharat Doshi (CFO of the M& M Group) and make sense of their sense on being the highest bidder at Rs 58 for Satyam
Anand Mahindra reiterated that their’s was yet only the Highest Bid and not the Winning Bid…they would need to await CLB approval to confirm that they indeed had won
Anand Mahindra spoke of contacting each and every one of Satyam’s clients,like Vikram Pandit of Citicorp and GM to assure them of the highest level of Client servicing…..I daresay,these American Giants are battling for their own survival !
On how they arrived at Rs 58 as the Bid,Anand Mahindra refused to disclose the specifics ,but suavely stated that they preferrred to look forward and not look back to see who’s chasing
The bid at Rs 58 did consider the quantum of legal liabilities that may arise,but Vineet Nayyar parried a question to disclose the exact amount they had estimated…This is a calculated risk that TM has taken,stated Anand Mahindra…Nayyar hoped they are right on this but cannot be 100% sure or guarantee limited liability.
The bid at Rs 58 also considered the fact the the Revenues had dropped from US $ 1.8 b to US $ 1.5 b and further to US $ 1.3 b and the low margins are actually seen as opportunities to plug…However this would mean a monthly turnover of just Rs 550 crs and operating profits of Rs 10 crs at current margins…This is bad and simply does not support a valuation and bid of Rs 58 !…This would mean an EPS of below Rs 2 !…Satyam needs to earn at a net level Rs 750 crs to Rs 1000 crs PAT per annum to show an EPS of Rs 8 to Rs 10 to support a price of Rs 58….This indicates a strong trimming of the workforce..Covered in the last point below
Vineet Nayyar disclosed that both,Satyam and Tech Mahindra complimented each other in many ways…TM had 70% of Revenues in GBP and Euros while Satyam had 70% in US Dollars,thus providing a natural currency hedge…though there were 600 clients,none were overlapping…also TM has Telecom Domain expertise,while Satyam was competent in several other verticals
Bharat Doshi disclosed that the Rs 2890 crs required to fund the 51% stake would be funded by Rs 700 Crs internal accruals in TM and Rs 2200 crs had been tied up as debt with Kotak.TM’s Balance Sheet comfortably supported raising this debt
The Bid was supported strongly by all Boards…Mahindra & Mahindra,Tech Mahindra and even British Telecom
It is too early to decide whether the Satyam Workforce will be trimmed…With falling revenues,low margins,I am quite sure this will happen…If they lay off 10000 ,there will be saving of Rs 400 crs