Will Satyam’s assets land it a good value?

Will Satyam’s assets land it a good value?
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First Published: Wed, Apr 08 2009. 11 32 PM IST

 Valuable resource: Satyam has close to 450-500 acres of land in India and 60-100 acres outside the country. Bharath Sai / Mint
Valuable resource: Satyam has close to 450-500 acres of land in India and 60-100 acres outside the country. Bharath Sai / Mint
Updated: Wed, Apr 08 2009. 11 32 PM IST
Bangalore: Fraud-hit Satyam Computer Services Ltd’s revenue and liabilities may be under question but it is high on land assets. The total value of Satyam’s landbank is estimated at Rs1,800 crore, CNBC-TV18 reported recently.
Valuable resource: Satyam has close to 450-500 acres of land in India and 60-100 acres outside the country. Bharath Sai / Mint
And now the details of that comforting figure.
Satyam has close to 450-500 acres of land in India and 60-100 acres outside India. The built-up area will gross at least 7.5 million sq. ft spread over Hyderabad, Bangalore, Chennai, Vizhakapatnam, Bhubaneshwar, Egypt, Malaysia and China. This is roughly one-third of Infosys Technology Ltd’s built-up area of 21.2 million sq. ft. With cost of construction and furnishing at Rs2,000 per sq. ft, the value of Satyam’s built-up infrastructure is pegged at a minimum Rs1,500 crore.
Over and above this, it also has freehold land where information technology (IT) special economic zones can be constructed. It has 150 acres in Nagpur, 50 acres in Madurai and Gandhinagar and 20 acres in Pune.
Analysts are divided whether to value these assets or not.
“These land assets have been given by state governments at a very low cost,” said a technology analyst with a leading institutional brokerage, requesting he not be named.
“Most of these land banks come with clauses that if they are not utilized they will have to be returned,” the analyst added. Prospective bidders for Satyam, which has been put on sale by the government-appointed board, have been told that they cannot mortgage any asset of Satyam, he noted.
Typically in IT acquisitions, deals are stuck at multiples to revenues. At a going concern, a valuation based on multiples of revenue or multiples of operating profit hold good. But this time around, going by just revenue will not help, according to observers. For any IT company to build 7.5 million sq. ft would entail a minimum investment of Rs1,500 crore and this should be treated as the minimum valuation for Satyam. Final bids expected by 13 April will reveal whether bidders follow this valuation method or not.
cnbctv18@livemint.com
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First Published: Wed, Apr 08 2009. 11 32 PM IST