L&T's Satyam share sale pulls down scrip

Larsen & Toubro (L&T) has sold a third of its holding in Mahindra Satyam, or 27.24 million shares, for Rs 306.54 crore, taking the software company’s share price down by 6.6 per cent, the biggest fall in five months.

Of these, Japanese institutional investor Nomura bought about 22 million shares in a block deal on Friday.

This transaction at Rs 112.52 a share, about 4.2 per cent discount to Thursday’s closing price of Rs 117.45, has pulled down the scrip, but the entry of Nomura is expected to inject fresh hope into investors of Mahindra Satyam, said a Mumbai-based analyst.The engineering giant, which was holding 81.13 million shares, or a 6.9 per cent stake, had bought shares at an average of Rs 82 in two transactions early this year.Considering the average purchase price, L&T would have booked a profit before tax of Rs 83 crore, said analysts.As the complete exit of L&T would burden it with higher capital gains tax, further offloading would take place only in the next quarter, said banking sources.When asked about the usage of the sale funds, company sources said it would be kept for future investments that include acquisitions in the information technology sector.However, they denied the rumours that L&T was looking to takeover software major Patni Computers.L&T acquired a stake in Hyderabad-based software maker in the run-up to an auction of a 31 per cent stake. Tech Mahindra, a Mahindra & Mahindra group company, had outbid L&T in the takeover battle.Under the bid guidelines L&T had to retain its stake in Satyam Computer for six months. This ended on October 13, leading to the first offloading.On Friday, shares of Mahindra Satyam reacted negatively and were trading at Rs 109.7, down 6.60% on the BSE and Rs... L&T opened the book on Thursday after the trading hours and the transaction will be completed by Wednesday morning. The first transaction, at Rs 112.50 a share, is at a 4.21 per cent discount to the market price," said sources. Nomura is believed to be the sole bookrunner.L&T has 81.13 million shares of the 1.17 billion equity of Mahindra Satyam. At Thursday’s closing price of Rs 117.45, L&T’s holding in Mahindra Satyam is valued at Rs 950 crore. The company bought the shares in two transactions earlier, for Rs 665 crore, on an average of Rs 82 a share. It could book a profit before tax of about Rs 285 crore if it sells all the shares at Thursday’s price.

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On April 13, L&T, one of the suitors for Satyam Computer, had lost in the bid for a controlling stake in the scam-tainted company to Tech Mahindra, a Mahindra & Mahindra group company. By the Satyam sale conditions, bidders were barred from selling their stakes for six months, as they were privy to Satyam’s financial information, which was not made public at that time.Three months before, after Satyam revealed the financial figures ahead of an open offer by Tech Mahindra, L&T sought the market regulator’s permission for an early sales of its stake. The company did not, however, pursue the matter, since the lock-in period for holding the shares was nearing."L&T was looking to buy assets in the information technology space to grow its subsidiary, L&T Infotech. The proceeds could be used for acquisition. Since the market has recovered partly, this is the time to sell and book profit," said a Mumbai-based analyst.

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L&T first bought 4 per cent in Satyam for around Rs 380 crore through its wholly owned subsidiary, L&T Capital, in early January. The company had spent around Rs 170 a share. Two or three weeks after founder-head Ramalinga Raju’s revelations that Satyam’s accounts had been overstated for several years, L&T bought 8 per cent, when the share price fluctuated between Rs 29 and Rs 39. With this, the average cost of shares in L&T’s kitty fell to Rs 82 and the stake went up to 12.04 per cent. After the open offer following the Tech Mahindra win, Satyam’s capital base expanded and L&T’s stake went down to 6.9 per cent.

(Disclaimer : The above chart shown is for study purpose only and not for trading decision)

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