Subba’s Serendipitous moments

April 15, 2009

Satyam clearly overvalued

Subsequent to my earlier post where I mentioned that Tech Mahindra seems to have over paid for Satyam, got an email from an ex-Satyam employee(who prefers to remain anonymous) He mentions that Satyam’s annual revenues are more likely to be between $1.3 – $1.5 billion.

If that be the case, then Tech Mahindra has valued Satyam at a revenue multiple of 1X revenues which is quite high by industry standards in the current environment. Even Accenture a blue chip with impeccable credentials is only quoted at 0.7X revenues.

So, it indeed looks that Tech Mahindra has over valued Satyam.

It is also intriguing that since the beginning there were no serious contenders for this business — be it from US or Europe multinationals or even from Indian IT service providers. L&T which was considered the favorite to win was only trying to reduce their average buying price since they had acquired 12% of Satyam for a high price in the past.

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