A conclusion to the Satyam Saga

The merger of Mahindra Satyam into Tech Mahindra last week sent both stocks soaring. The swap deal of two shares of the parent for every 17 of Mahindra Satyam was seen as favouring Satyam shareholders marginally.

The parent, through this deal, paid well over a third of the price it paid earlier for a controlling stake in 2009. Satyam shareholders who did not tender their shares in the open offer made by Tech Mahindra in June 2009 have been rewarded for their patience.

In all, the markets had enough reason to push the Satyam Computer Services stock up by 17 per cent in the past week. But the stock that stole the limelight was Tech Mahindra with a 21 per cent rally over the week.

Clearly, the parent company was seen as a bigger beneficiary for the following reasons: One, in a sector where size matters, the merger will help the combined entity command higher valuations and display more resilience, especially during a global slowdown.

Two, Satyam's exposure to segments such as financial services and manufacturing will provide the much-needed diversification to Tech Mahindra's portfolio. The latter primarily caters to the telecom sector and receives a chunk of its revenues from a single client, British Telecom .

Hit by Australian mining tax

Indian steel companies may have to shell out a few dollars more to import metallurgical coal from Australian mines, effective July 1. The Australian government passed a Bill that will impose a 30 per cent tax on the profits on local iron ore and coal miners, but will allow certain deductions.

Most of the large steel companies in India such as SAIL and JSW Steel depend on imported coal. Others such as Tata Steel with substantial European operations also depend entirely on external sources for iron ore. Australian miners are likely to pass on the tax to customers, primarily from China and India.

While Indian steel companies will be impacted, the new tax may actually benefit Indian miners such as NMDC and Sesa Goa as a result of higher iron ore prices.

The stocks of steel makers such as Tata Steel and JSW Steel as well that of power utilities such as CESC and Adani Power took a hit. But power companies may not be impacted much in the medium term. While a handful of companies such as Lanco Infratech, Adani Enterprises, GVK Power and CESC have stakes in Australian coal mines, supplies from those mines will commence only after 2-3 years. This may provide time for players to build the costs into new purchase agreements with electricity boards.

That said, both Indonesia and Australia, two of the key coal resource regions for India, have turned expensive for power companies.

Less loan for same gold

Finance companies that lend against gold may see their profit margins lose sheen. In a series of moves aimed at regulating gold loans, the RBI restricted the gold loan-to-value ratio to 60 per cent. That means the NBFCs can lend only up to 60 per cent of the gold value as loan. Large players such as Muthoot Finance and Manappuram Finance had loan to value ratio of 68-69 per cent on an average. Loans could be extended up to 85-90 per cent of the gold value in some cases.

The move will mean that gold loan companies will have to shrink their loan book for the same gold holdings. Customers typically approach NBFCs for the higher loan to value that they offer. With this sheen gone now, the NBFCs may lose their customers to banks.

Banks often lend at a lower rate compared with NBFCs. Any such shift to banks may force NBFCs to cut their rates and take a margin hit.

Stocks of Muthoot Finance and Manappuram Finance reacted to the news with a 10-20 per cent fall on Thursday.

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