L&T, Essar keen on Satyam

The beleaguered Satyam Computer Services Ltd seems to be finding some suitors. While infrastructure major Larsen and Toubro (L&T)
has shown interest in taking management control of the company, Essar's BPO arm, Aegis, is reportedly keen on acquiring Satyam's BPO business.

The news triggered a rally in Satyam's shares which rose by 5.5% to Rs 26.85 on a day when sensex fell by 2.45%.

L&T CMD A M Naik on Tuesday discussed the Satyam issue with corporate affairs minister P C Gupta. Naik said he was worried about protecting L&T's interest in the company, which currently stands at 4%. Though the stake was acquired as a portfolio investment, Naik, responding to questions, didn't deny that L&T was keen to acquire the company. It's believed that the acquisition bid would be made through L&T's software arm.

Though P C Gupta is believed to have told Naik that Satyam's board would decide the matter, it's learned that the government isn't keen on either L&T or Essar buying Satyam at the moment. Instead, it wants the company to consolidate its finances before allowing any acquisition to take place.

Tarun Das, a government nominee on the Satyam board, said that a number of foreign and domestic companies had expressed interest in acquiring the scam-tainted company. The company's board had not taken any view on the issue so far.

Another board member, Deepak Parekh, had earlier said that the option of merger and acquisition was always open for the company. It is learned that the board is likely to soon appoint a merchant banker to zero in on a suitor. Earlier, B Ramalinga Raju's board in late December had appointed DSP Merrill Lynch to find a strategic investor in the company. But later, Raju's sensational disclosure that he had fudged company accounts ended the company's relationship with DSP Merrill Lynch.

Meanwhile, Essar's Aegis has also submitted an expression of interest in buying out Satyam's 3,500-seat BPO business. CEO of Aegis, Apporva Sengupta, confirmed that he had submitted an EOI for the business but refused to disclose the amount he would be willing to pay. He said he would study details of the company's revenue and verticals before putting a price tag on it.

According to Satyam's second quarter result, its BPO's revenue for the quarter ending September 2008 was at Rs 55.6 crore, down 8.65% compared with the corresponding period of the previous year. Its BPO business has not broken even so far. In the second quarter, BPO business had made a loss of Rs 20.05 crore.

The acquisition of Satyam's BPO business will accelerate the expansion of Aegis's internet enabled businesses. Aegis currently has 32,000 employees and has recently acquired the Philippines-based PeopleSupport Inc for $ 250 million.

An IT expert said Aegis and Satyam's BPO arm are likely to have good synergy. Satyam BPO operates from Hyderabad, Bangalore, Chennai and some on-site centres. It has clients such as BellSouth and Verizon in telecom, Caterpillar in construction and GlaxoSmithKline in health care.

It is learned that the issue of roping in a strategic partner has acquired urgency as the company found that most of its receivables for next couple of months are already mortgaged to ICICI Bank. Therefore, the company needs immediate cash to continue operations. An acquisition would help the company tide over the crisis and protect shareholders' interest.