Future outlook of Satyam Computer

>> Thursday, December 18, 2008

Yesterday the badly beaten up stock Satyam which was down over 35% is up today 10% odd.

It had announced to buy Maytas Infra day before yesterday (the day when Satyams ADR was down over 55%). But yesterday it plans to cancel the deal.

Why did they do so? (Canceled the deal off)

Satyam didn’t expect the investors to have this kind of reaction, investors sentiments turned out to be negative. So they had to cancel the deal off.

What was the cost to Satyam?

Satyam actually lost 590 crores from its market cap. in just one day.

Why did Satyam want to acquire a stake in a Real Estate company?

Actually the answer is that Ramalinga Raju, a cofounder of SATYAM and his family had 31% stake in Maytas Infra. They wanted to diversify and expand their business line.

Actually if the deal would have happened Satyam would be at a loss as the condition of the real estate in India is worst. See Unitech & HDIL for example.

The future of the stock looks bright if available within 152 – 158 range now.

Happy Investing.

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Anonymous December 18, 2008 at 6:36 PM  

People are failing to see the bigger picture. Satyam is a know IT company. But then why should this stop it from diversifying it other sectors. If the same move had been done by any other diversified business then it would not have raised eyebrows. But to diversify Satyam has to begin somewhere.

What everyone forgets is that when Raju started Satyam he did not have much experience in running a company. But on the way he gained it and made Satyam into a giant. Similarly by buying a realestate firm he could have created oppurtunities for further diversification and grown it to a bigger business.