Larsen & Toubro brilliantly positioned to Lead India into the next level of Dynamic Growth…but who will Lead Larsen itself after Mr Naik !?

We all Love Larsen & Toubro and have capitalised superbly on it’s brilliant run on the bourses in the past years…and with India positioned to emerge as a World Economic Superpower in the years to come,Larsen has it’s best Days up ahead !…It simply has to occupy significant space in your Core Portfolio

Larsen is positioned to Lead India into the next Level of Dynamic Growth in the Years ahead….but who will Lead Larsen itself after Mr Naik !?

This Larsen Leadership Heir Question has been asked before…a latest take on this is by Forbes India…it’s  gives an elaborate take on this in their March 5,2010 Issue…you can access the article on the web too

The article refers to GE and Siemens capturing the opportunities in USA and Europe in the past decades to make them behemoths…Larsen is on a similar threshold in India…and interestingly,GE and Siemens are looking towards India as their Saviour on the back of the Global Financial and Economic Crisis epicentered in the West !

My take on this Larsen Leadership Heir is a little ‘hatke’….It does not really matter who really leads Larsen after Mr Naik…The Momentum is so strong for the next level of Dynamic Growth in the years ahead,that Larsen will move ahead regardless who’s heading it, and continue to scale up and  capture and leverage the giant opportunities that are arising……something like our FM’s Position…does not really matter who’s our FM….India is on a long term Dynamic growth path ahead…Infrastructure and Domestic Consuption being the Two major Drivers…..the Momentum itself will drive our Economy

Extrapolate this to our Stock Markets…anyone who Invests in Equity will make good and even great Money over the Years to Come…..and Larsen & Toubro must be your Core Investment for the Long Term !

Cheers! 

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