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A neat prize now at cut-price rate

Starting out as a tale of gargantuan fraud, the Satyam story is now moving into the realm of corporate acquisition.

india Updated: Jan 25, 2009 23:32 IST

That Satyam is drawing buyer interest from a clutch of corporate houses even before auditors have figured out how big a hole B. Ramalinga Raju left in his company is testimony to the compelling logic of outsourcing. Although the frontline software companies — TCS, Infosys and Wipro — are not buying, smaller players like Tech Mahindra, L&T Infotech, HCL and iGate are hovering over what could turn out to be a garden sale of a fairly robust business plan. India’s top three information technology companies have weathered the worst quarter in living memory with a slide in dollar profits and have notched up a fair number of new clients alongside increased sales revenue. Outsourcing, clearly, is growing even as the world hurtles into recession. What till recently was India’s fourth largest infotech company will be a prize catch for middle-rung competitors wanting to pitchfork themselves into the big league.

If the government-appointed board hopes to contain the toxic Raju legacy, it will have to weed out the bad Satyam from the good Satyam. The new management that is being drafted will have to run the company as a going concern while investigators follow the money trail in dodgy real estate and infrastructure deals. Some of these hold immense value, mainly the Rs 12,000 crore Hyderabad metro rail and the Rs 1,600 crore Machlipatanam port projects awarded to Maytas Infrastructure, through which Raju was hoping to clean up Satyam’s books. This could explain the unlikely white knight in Larsen & Toubro, which apart from the inorganic growth of its fledgling software arm, could regard either of the projects as a plum addition to its enviable Rs 50,000 crore order book in the construction business. The blue-chip infrastructure behemoth bought 4 per cent of the Satyam stock after the software major began to unravel and has since raised its holding to 12 per cent in what it describes as an attempt to strengthen “its position to influence the Satyam board”.

Starting out as a tale of gargantuan fraud, the Satyam story is now moving into the realm of corporate acquisition. Sold as a bundle, it could be the biggest takeover in India in these depressed times. Cut into pieces, there are chunks that by themselves can generate buyer interest. Either way, it is heartening that the Satyam business model will live on in one form or the other after being the vehicle for the biggest corporate con in the country’s history.