Larsen & Toubro (L&T) literally set the cat among the pigeons on Friday when it decided to increase its stake in Satyam Computer Services to 12 per cent. The move surprised India Inc and rattled other interested suitors.
Larsen and Toubro (L&T) on Friday announced that it bought 7.56 per cent (5.09 crore shares) of Satyam Computer Services shares through open market, taking L&T’s stake in Satyam to 12.4 per cent (8.11 crore shares) of the total shares.L&T bought 1.18 crore shares at a price of Rs. 35.07 per share through a bulk deal, the company informed the Bombay Stock Exchange.
With L&T’s holding having increased three fold to 12%, there has been some curiosity about the company’s decision to make the investment in Satyam. While the earlier 4% was acquired for about Rs 400 crore, the later 8% was acquired for Rs176.42 crore, taking L&T’s total investment in the company to about Rs 575 crore. Importantly, after Raju’s confession, some of Satyam’s shareholders like Lazard and Aberdeen have sold their holding albeit at a loss. The value of L&T’s holding too has dropped substantially in the process .
Why did L&T decide to make this investment or how will it make a difference to its subsidiary, L&T Infotech are just some of the issues that are being raised.The move has been described as “audacious” and “desperate” within corporate circles, with sources maintaining that L&T is merely keen to make good the hefty outgo for the initial four per cent which had caught its top management off guard.
It needs to be stated that L&T Infotech was set up in 1996 and has about 10,000 employees. In terms of revenues it grossed Rs 1,574 crore for March 2008 and has clients like Chevron, Hitachi, Sanyo and Lafarge.
L&T Infotech, which started off by catering to the demands of its parent company, is today a name in the infotech business. It is known for its integration of ERP with areas like plant maintenance, production, materials management, logistics and quality management systems.