Larsen & Toubro (L&T) plans to exit Mahindra Satyam. It has sought permission from market regulator, Securities and Exchange Board of India, to sell its 8% stake, a spokesman for the engineering & construction major said.
Since L&T as one of the bidders for Satyam had agreed to a six-month lock-in period for its investment in the company, the sale can happen only after October 14.
At the current price?of Rs 112.95 a share on the BSE?the Satyam stake sale will unlock Rs 900 crore for L&T.
India?s largest engineering company had invested about Rs 640 crore for around 12.04% stake in Satyam Computer Services at an average price of Rs 79 per share before the company was taken over by Tech Mahindra in April. Tech Mahindra bought 31% stake in Satyam for Rs 1,756 crore, and launched an open offer for 20% more stake. But the open offer got poor response from shareholders, following which Satyam went in for a preferential allotment of shares to Tech Mahindra, widening its equity base.
Satyam had not reported audited results beyond the September quarter after founder Ramalinga Raju stated that the company?s profits had been overstated for years together.
In June, ahead of the Tech Mhindra open offer, Satyam had released financial figures for the first time since the revelation of the fraud.
?We have asked for permission to sale our stake, since the information that was made available to us as bidders are public now,? commented a spokesperson for L&T. ?Since the information is all public now, we should be allowed to sell our stake in the company and move on,? the spokesperson said.
However, L&T is not planning to sell the stake immediately, and will weigh various issues, including market conditions, before selling its stake. L&T has sought the permission as an enabling arrangement and has not set a timeframe for selling its holding.
?There could a lot of optimism and this can be based on the fact that the company?s ADR in the overseas market trades at a significant premium to the domestic prices. This indicates some positive sentiment and L&T could look to cash out on this and get a good price,? says an investment banker.
The Satyam Computers has seen its ADR premium widen from 20.23% on January 1, 2009 to 29.26% on August 4. L&T had picked up a 3.95% stake in Satyam in December through L&T Capital, a subsidiary of L&T, a little before Satyam?s founder-chairman, Ramalinga Raju, made the disclosure of fraud in the company. Later in January, L&T bought another 8% stake from the secondary market. After Ramalinga Raju?s disclosures on January 7, the shares of Satyam plunged to a low of Rs 6.30 a share on the NSE and Rs 11.50 on the BSE on January 9, 2009.
On Wednesday, Satyam?s shares closed at Rs 112.95, up by 5.41% on the Bombay Stock Exchange. L&T shares, in contrast, closed at Rs 1,514.80, down 0.31% on the BSE.
?For L&T, the shareholding in Mahindra Satyam is nothing but a financial investment and it does not make any sense for it to hold on to that. As the share prices of Satyam is going up, it makes sense for L&T to think of selling its stake and book some profit in the process. It?ll bring in cash for the company as well,? commented Harit Shah, analyst (IT& telecom), Angel Broking.