Larsen and Toubro to raise stake in Satyam

Engineering and infrastructure major Larsen and Toubro (L&T) on Tuesday said it might further raise its stake in the scam-tainted Satyam Computers.

"Overall, we are only trying to improve our situation," company chairman AM Naik told a news channel. "If nothing else, to really make L&T Infotech bigger by our stake in Satyam," Naik said.

Incidentally, L&T Infotech's revenues are expected to touch $500 million (Rs.25 billion) this fiscal.

The company's chief financial officer YM Deosthalee reiterated the view, saying: “We need to have a reasonable stake in the company."

Last week, L&T had raised its stake in Satyam to 12 per cent from 4 per cent. It also believes the stake hike would ensure a seat on the IT firm's board.

However, Deosthalee also said "going forward, there will be complications”.

“There are legal risks associated with Satyam,” Deosthalee said, adding, “This company has significant embedded value and has demonstrated track record.”

There will be a number of challenges in front of L&T, one of them being convincing investors about enhancing its software business, which forms less than 10 per cent of its revenue.

Satyam faces liabilities in the form of US class action lawsuits after former chairman B Ramalinga Raju admitted to inflating earnings for "several years".

“We believe margins as part of the disclosure are not necessarily the real margins,” Deosthalee said.

Earlier, Tarun Das, a member on the newly-formed Satyam board, had said: "We have looked at the legal issues which the company faces because of the class actions suits filed in America and have appointed legal advisors to deal with that."