Who would have been Satyam's best fit? Experts debate

Tech Mahindra has won the bid for Satyam Computer Services. As Satyam's bidding process was gathering steam, experts analysed who would have been the best fit for Satyam.

Who would have been the best fit?

Senior Analyst at Forrester, Sudin Apte, believes that L&T would have been a better option as they have a sizeable IT business and a good overlap. Satyam's clients, he believes, would think comfortable if an engineering focused company buys as against the financial services company buys.

Apte said there are few benefits of Cognizant as the winner as well. "The size is manageable $ 2 billion of Cognizant's and $ 1.5 or $ 1.6 billion of Satyam put together can create a $ 3.4 billion or $ 4 billion company. It can be a sizeable competition to Tata Consultancy Services (TCS) and Infosys. It would be a different force, if Cognizant wins the deal and if they are in the process."

Apte pegged Satyam's revenue at $ 1.2 billion if Cognizant takes over and at $ 700-800 million if Tech Mahindra takes over. He said Satyam has incurred damages worth nearly $ 2.4 billion in the last four months and feels that Rs 65 per share is a high price for Satyam. He believes that there will be least exit of Satyam clients if L&T or Cognizant took over Satyam and the maximum exit of clients in case of Tech Mahindra. He added that the way employees look at a Satyam buyer would play a key role.

Deven Choksey of KR Choksey Securities, was also more clear about L&T than Tech Mahindra. According to him, with L&T people are worried that if they might be moving in this space more aggressively then that could put off some amount of earnings for the company for next 2-3 years. But over a longer period of time this particular venture should be good for L&T.

What should the current holder of the Satyam stock do?

Apurva Shah of Prabhudas Lilladher, earlier said if a good, strong IT company wins Satyam, then the shareholder should stick on with the company. But if it is a private equity investor or such investor, he feels that shareholders may want to tender shares.

What will happen to Satyam?

Apte said with every bidder there is a class of Satyam's clients who is not happy with a possible buyer. "For example, an insurance company will not be as happy if L&T takes over as manufacturing clients of Satyam would be . On other hand, if I am a hardcore manufacturing company or Satyam does a product engineering work for me and if Cognizant buys that then I may wonder whether Cognizant understands my product engineering space. So the point is that out of the three bidders which we are talking about which bidder has minimum dissatisfaction with the current Satyam clients."

According to Apte, with every bidder there is a class of dissatisfied client who will be unhappy if this particular bidder takes over. L&T, he believes, has minimal exits followed by Cognizant and Tech Mahindra will have many more dissatisfied clients.