MUMBAI: L&T Infotech has evinced a lot of interest in Satyam recently. Apart from operational and vertical synergies, it will give L&T a back-door entry into the stock exchanges.

Here are the major reasons why L&T Infotech is interested in Satyam.

Reason one
Back door to list on bourses
Reverse merger or takeover will provide back-door entry to stock exchange
Reverse merger will bring down long and complex procedure of listing
During tough environment, financially sound companies take reverse merger to list globally
For the last three years, L&T Infotech has been trying to list on the bourses
Less equity dilution than IPO, if Satyam is at current levels
Will save 1-2% of IPO expenses

Reason two
Operational Synergies
Scale up business to almost four times the current size
Analysts say, in FY2009, L&T will post revenue of Rs 2,000 cr
Post acquisition of Satyam, it will become $2.65 billion from $400 million currently
Set up in 1997, L&T Infotech lagged way below in comparison to peers
Highlight L&T credibility to wipe out Satyam scandal
L&T creditability will help Satyam to raise funds
Can bid for top IT deals, which L&T has been trying for years

Reason three
Vertical Synergies
Consolidate its strength in manufacturing through Satyam’s ERP practice
L&T Infotech derives 34% revenue from manufacturing verticals, Satyam nearly 24%
Forrester says Satyam frittered away advantage for SAP practice due to fraud
Nearly 42-43% of Satyam revenue derives from ERP practice
Satyam’s ERP practice, with already manufacturing focus, will increase billing rate significantly
Exposure to financial services vertical through Satyam, which L&T has been striving for long
Post-scandal, Satyam employees in the ERP vertical are in high demand
Expertise in ERP solution would be a useful springboard to growth

L&T- Satyam : How the bid stake up
L&T management owns 4% of equity of Satyam
L&T bought Satyam shares post Maytas announcement,
Bought shares in the range of Rs 200-220/share
L&T currently making Mark-to-Market losses of Rs 380-400 crore
Reports suggest L&T made presentation in front of corporate affairs ministry for possible relaxation in open offer
Under Sebi takeover act, the acquiring company can ask for open offer relaxation
Open offer relaxation needs green signal from Sebi takeover panel
Relaxation in open offer will keep the valuation of the company
Investment of L&T will determine the liability of L&T shareholders to Satyam
Lower valuation will limit the liability of L&T towards contingent liabilities
Analysts estimate, apart from the SEC class suit, company have contingent liabilities of $1.25 billion

About L&T Infotech
Set up in 1997, employs over 10,000 employees
Contributes nearly 6.3% to L&T’s consolidated profit and loss account
Caters to clients like Hitachi, Lafarge, Chevron and BPCL

L&T Infotech-Satyam
Possible Merger: Key comparison