Satyam loss is L&T's blessing in disguise

The Street appears to be quite relieved that Larsen and Toubro hasn't won the bid for Satyam Computer Services.

The L&T stock, which fell by over 5 per cent in intra-day trades on Monday bounced back towards the end of the session though it was still in the red. The stock has been badly de-rated since the engineering major made it clear that it was a contender for Satyam, picking up a 12 per cent stake in the tech firm.

Had L&T won control at the winning bid of Rs 58 per share, the stock may have lost further ground. As it stands, not too much damage has been done.

It's a pity L&T can't surrender the shares which it acquired at an average of Rs 80 per share, at the open offer price of Rs 58. It may have lost around Rs 180 crore (Rs 1.8 billion) -- that's about a 5 per cent fall on an estimated earnings per share of Rs 63 for 2009-10.

But, it would have freed up close to Rs 500 crore (Rs 5 billion) of cash and could have moved on. Now, it's stuck with the stake and the mark to market loss would be around Rs 270 crore (Rs 2.7 billion).

However, the company has been winning orders of late and even the slightest signs of revival in the economy will see the stock being re-rated. At Rs 824, L&T trades a price-earnings multiple of 13 times (without m-t-m losses) which is not too expensive.