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MindTree seems the best bet for Satyam

As government-appointed directors pick up the pieces to resolve the mess in fraud-mauled Satyam Computer Services Ltd, some truths need to be borne in mind, writes N Madhavan.

india Updated: Jan 12, 2009 00:11 IST
N Madhavan

As government-appointed directors pick up the pieces to resolve the mess in fraud-mauled Satyam Computer Services Ltd, some truths need to be borne in mind. It is still a 53,000-employee-strong company, with customer relationships, campuses and a huge amount of knowledge and skills floating amidst all that.

That is where the value lies for the future, beyond the mess left by Chairman Ramalinga Raju who was drowned in the profit numbers he cooked up. Beyond the liabilities of debt and lawsuits lies the core value, and letting it evaporate in the
uncertainties surrounding the company would be bad for the employees, customers and shareholders.

The best course, I think, is for a bailout in which a strategic IT partner, private equity investors with a healthy risk appetite and employees play a collective, constructive role in putting the company back on the rails. This would probably need some cash infusion, a purge in Satyam's top management, and a top-quality suitor-acquirer who inspires confidence among the employees.

One needs to look at it from the point of view of risk-reward ratios for those may bail out the company. Employees will be happy to see their jobs protected and may get down to business as usual if there is a quick signal of assurance from above.

No one is in a hurry to jump jobs amid a global slowdown in a market that may bring on head-hunting vultures looking for cheap prey.

Who, then, could be a fair suitor? Tech Mahindra says it is only interested in the telecom part of the business. Larsen & Toubro, which holds 4 per cent after a month of buying amid the tumult is in a dubious state as L&T Infotech is not exactly a high-profile player in software. Infosys says it won’t touch it. Wipro, IBM and Accenture are doing well managing their own scale and hiring away staff. I suspect This deal is too messy for Wipro Chairman Azim Premji’s stealthy, hardball style.

European companies like Capgemini are short of cash. Shiv Nadar's HCL Technologies has just beaten Infosys to acquire UK-
based Axon, and is too busy digesting it.

I would my money on somebody like MindTree Ltd which has so far only denied talks, not ruled out interest,. And it has already digested its acquisition of fellow Bangalorean AztecSoft Ltd.

This is run by former Wipro President Ashok Soota and other Wipro-ites like the charming Subroto Bagchi. They have tremendous credibility as employers and managers who inspire trust. The company, with around 6,000 employees, is valued at Rs. 900 crore, about half of Satyam’s market capitalisation.

But, it has strong management bandwidth. This could be a strategic fit in which Satyam can bring customer relations and employee scale and MindTree the management credibility and execution. The two firms also have complementary skills and locations.

Sweetened by cash from a smart private equity firm with a healthy risk appetite – and blessed by the state apparatus, Satyam could look for a high noon than a sunset.

I hope I did not write a fairy tale there.

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