Poll Results: Should L&T take over Satyam? - Views on News from Equitymaster

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Poll Results: Should L&T take over Satyam?

Feb 5, 2009

We recently ran a poll on our website asking readers their view on whether L&T should take over Satyam. The final result is intriguing to us as it runs against our belief that L&T will not be doing a right thing to buy out Satyam.

Before we go any further, here are the results to the three questions we asked.

The first question was whether the respondent was an investor in L&T. A majority - 59% - were. The second question was whether L&T is doing the right thing to take over Satyam at a time when there is a lot of ambiguity regarding the latter's true financial and business status. This answer came to us as a shocker as a majority of the respondents - 63% - polled that L&T's decision is, in fact, right. While 30% voted that L&T isn't doing the right thing, 7% had no view to this question.

The third and final question was whether the respondent would invest or stay invested in L&T if the company were to acquire Satyam. While 20% answered in the negative, again a majority 71% - polled that they would either stay invested or buy into L&T if the company were to indeed buy out the fraud-hit Satyam. Incidentally, the broader markets have not really given a thumbs-up to L&T's actions as seen from its stock price movement post the increase in stake from 2.5% to 4% (see right-hand chart below).

Now, here is the most interesting aspect of the poll results. The results that indicate that L&T is doing the right thing do not change whether the respondent is an investor in the company or not! While the first chart indicates the view of all respondents who are investors in L&T. The second shows the view of all respondents who are not investors in the company.

So here we are! Our view of L&T 'not' doing the right thing by aggressively pursuing for Satyam has been turned upside down. We have this view given the fact that L&T is trying to aggressively diversify 'again' into a field where it does not have much experience. The company is known for its engineering skills. But we do not see it as a software superpower in the future.

Of course, L&T's management must know better than us where it is trying to get into. But given the past track record of entering unrelated businesses that ultimately did not do well, we maintain that L&T isn't going the right way in its proposed takeover of Satyam.

We are now running a new poll India's Most Admired Corporate. Participate Now!

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