Wednesday, December 22, 2010

S P Tulsian on Mahindra Satyam

Q: There are talks now that the Satyam shareholders are opposing the merger, they may hit the minority shareholders etc. What are you thoughts on the stock price, it had a bit surge yesterday?

A: If I take an independent view, it is always beneficial for the Mahindra Satyam shareholders and will be in profit if the company remains on a standalone basis and if it doesn’t merge with Tech-Mahindra. Right now everything is in place for Mahindra Satyam except for the margin front because you have your topline intact.

Maybe the employees are getting retained to the extent of about Rs 27,000-30,000 because you don’t have a cash flow problem. The company is cash rich having a balance of Rs 2,500 crore. What you need is a slight improvement in the margins which can take this share price to more than what it will show on an effective basis if it gets merged with Tech Mahindra or either way.

So it would be better that for the next couple of years, the company remains independent. The voice raised by the minority shareholders seems justified. Maybe for the Mahindra’s, it is in their interest to continue to cut the administrative cost or the controlling expenses as well as to have better ownership pattern of the merged entity. But for minority shareholders it is better if Mahindra Satyam remains as a standalone entity.


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