Maytas acquisition reversed. Questions remain: Anand Rathi
Satyam downgraded to SELL
???? Downgraded to SELL. We downgrade Satyam Computers to
SELL with a target of Rs150, based on 4.5x target PE on FY10e
earnings.
???? Maytas acquisition reversed. Satyam had yesterday announced
its acquisition of Maytas Properties (100% stake for US$1.3bn)
and Maytas Infra (51% stake for US$0.3bn). On account of huge
resistance from minority shareholders, the deal was finally
reversed late last night. This is a welcome relief, but the episode
will still raise concerns regarding Satyam’s corporate governance
for a while to come.
???? Question remains. Despite the reversal of the deal, it would still
raise questions regarding the financial health of the Maytas
entities, their promoters and its impact on Satyam finances ahead.
???? Downgrade rationale. The current turn of events raises
questions on the decision-taking abilities of the existing
management of Satyam. While we have not changed our estimates,
we capture this in our lower target PE ratings for this company.
We assign a target PE of 4.5x (same as for IT mid-caps) on FY10e
earnings of Rs34/share to arrive at a target price of Rs150. We
downgrade the stock to a SELL.
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