L&T may exit Satyam next week as lock-in expires

Engineering giant Larsen and Toubro (L&T) may exit Mahindra Satyam, formerly Satyam Computer Services, by starting the process of selling its 6.9 per cent stake soon after a lock-in period expires early next week.

The company aims to book a profit of over Rs 250 crore from the open market sale, said two sources familiar with the development.

L&T was one of the bidders for Satyam after its founder Ramalinga Raju confessed to fraud on January 7, this year and was subject to a six-month lock-in after the company was sold to Tech Mahindra on April 13, since it was privy to confidential financial information

"At present, the financial department is figuring out the tax liabilities that arise out of the changes in the company's investment portfolio. If the share price touches Rs 120, the company would prefer to exit and book a profit of over Rs 300 crore before tax. This would result in a net profit of Rs 200-250 crore after tax from the transaction," said the sources.

L&T has 81.13 million shares out of the 1.17 billion equity capital of Mahindra Satyam. At Tuesday's share price of Rs 114.30, L&T's holding in Mahindra Satyam is valued Rs 927 crore.

Two months ago, after Satyam revealed the financial figures ahead of an open offer by Tech Mahindra L&T sought the market regulator's permission to sell its stake early. The company did not, however, pursue the matter since the lock-in period for holding the shares was nearing.

L&T Chairman AM Naik told shareholders at L&T's annual general meeting in August that the company was expected to make a profit of up to Rs 250 crore from the stake sale.

"L&T considers Mahindra Satyam stake a pure investment and plans to exit at a good return. The profit from the transaction will be used for investments in its growth businesses such as power, financial services, defence and nuclear energy," said a Mumbai-based analyst.

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 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 stake went up to 12.04 per cent. After the open offer, Satyam's capital base expanded and L&T's stake went down to 6.9 per cent.