MUMBAI: Developments at Satyam Computer Services following B Ramalinga Raju’s confession had left many retail investors asking whether to sell or hold the company’s shares. But with the new management recently kicking off the bidding process to rope in a new investor, experts are of the opinion that one should remain invested in the stock with a long term perspective rather than treating it as a trading stock.

The offer for acquiring 51 per cent stake in the troubled IT firm has evoked interest from engineering and construction firm Larsen & Toubro, which already owns 12 per cent stake in Satyam, diversified Spice Group, IT services firm Tech Mahindra and Nasdaq-listed iGate and Tech Mahindra.

The bidding has two key conditions among others–the bidder should have net assets of over $150 million and whoever wins the bid can’t sell equity shares for a period of three years from the date of acquisition.

Revelation of the accounting fraud by chairman B Ramalinga Raju had led to a number of stock broking firms stopping coverage of the stock. But with the bidding now on, there is heavy speculation over Satyam’s future stock price movement.

“It’s very difficult to comment on Satyam’s stock price at this point of time as everything is yet under the wraps. The stock is moving on the news (of bidding process) and has shown some erratic movement in the past few days. It has also been removed from the F&O segment, hence trading is out of question at this point of time. However, for long term investors, I will advise holding the stock,” said Siddhartha Bhamre, Head-Derivatives, Angel Broking.
Anita Gandhi, head-institutional business at Arihant Capital said, “There is still a ray of hope for Satyam. Even after the whole episode, the company has still been getting contracts, which in itself is a confidence builder. The government has also lent support to the fraud-hit company with a board comprising efficient people. Once the current bidding process is over, there will be more clarity. Finally, the winner will act towards strengthening the business so that it can make up for the money invested. On that count, I believe investors should hold on to Satyam. Don’t expect miracles to happen overnight, but the stock will definitely offer slow and steady growth.”
Based on the submitted Expressions of Interest, eligible bidders would be short-listed and given access to certain business, financial and legal diligence material of Satyam provided they sign a non-disclosure and non-solicitation agreement. The process of the stake sale will involve 31 percent fresh equity shares and 20 percent open offer.

Satyam plunged into a crisis in January 2009 after founder Raju quit revealing that profits were falsified for years. The company is now overseen by a government appointed board, led by HDFC chairman Deepak Parekh and former NASSCOM chief Kiran Karnik.

Commenting on Satyam’s current status, VK Sharma, head of research at Anagram Stock Broking said, “It seems that the worst is over for Satyam. The company has taken drastic steps to curtail expenses and survive in the wake of unimaginable conditions. The company is using the available bank funding in a controlled and phased manner to meet immediate and near term operating requirements, including payments to vendors. Though it is losing some customers, there are few new orders as well. The company has bagged $250-million worth of deals over the past two months. According to management, current orders across industry verticals.”

“Taking into account all hitherto known information, we believe Satyam can eventually be sold for a price more than Rs 50 per share. We recommend short term traders to take a trading bet on Satyam at current market price for nippy 20 per cent return objective, with full knowledge of the risks involved and ready to jump the ship if any new adverse details present itself,” Sharma added.

On BSE Friday, Satyam Computer Services share closed at Rs 45.50, down 3.6 per cent from the previous close. The 52-week low for the stock is Rs 11.5 recorded on Jan 9, 2009.

source: Economictimes

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