On April 13th (an unlucky day for the winner) the "Board" of Satyam is supposed to announce the new owner, who will put in fresh equity and then make an open offer, for a 51% stake, which comes with many strings and lawsuits attached. Wonder why some companies are attracted to Satyam like fireflies to the light!!
Will there be a bidder who makes an unconditional offer? Maybe Larsen and Toubro, which wants to throw good money after bad. Will a PE investor get in? Very unlikely. Will and IBM or a Cognizant want it? It would be surprising, but still ok, as they would be able to stem the outflow of clients and hopefully retain some talent. If L&T gets the company, I am not sure that client retention will be all that easy.
The fact is that Satyam has some business, hopefully profitable. Perhaps in some spaces where the winner will not have anything already in place. The biggest challenge will be to weed out the bad apples in the company. This is not easy, given the fact that one of the conditionalities is to retain some 100 'key' employees. Why should the Board decide this way? Their job is to get the company sold. And if I were the buyer, why should I agree?
The other problem is the cost of legal battles that would have to be fought. Most of the battles would be frivolous ones filed by the 'ambulance chasers' and according to today's reports, from some family members.
I also feel that there is a vested interest from some quarters, which does not want a new owner in place, but is happy to see the present arrangement continue.
The interesting thing is that even three months after the exposure, there is no awareness of the actual headcount. I am also surprised that by now the balance sheet is not ready. If I were given the task, I would have had it ready in 30 days. It is not difficult. So, there seems to be an orchestrated attempt to hide things.
The ICAI has still not managed to find anything, as they are busy fighting the 'peer' review concepts and their burning desire to put down a firang (non- Indian) accounting firm.
The other fall out of this affair seems to be Maytas. I am sure that will be another great story.
For those who still hold shares in Satyam, I think that 13th may prove to be a good day to exit. If there is a winner, the market will start pricing in some great expectations, which would perhaps be the perfect exit opportunity.
I do not see the company returning to any kind of profitability to justify the present valuation in the next three to five years. I also wonder why the bidder has to bring in 'equity' in to the company. This is merely going to bloat the already high equity base. If the company needs some temporary support ( wonder why it would still need any cash, unless there is no business) the winner could easily come in with converts and then make an open offer or simply restructure the capital by going in for a capital reduction.
The other issue is one of cash flows.
If the business actually exists, the cash flow issues should have been over with some PSU banks having lent Rs.700 odd crores. I also wonder if all the terminal benefits have been fully funded.