Although satyam has appreciated 300% since acquisition, the up side is going forward maxes @Rs 320, under most optimistic scenario(rev cagr of 24% for next 4 years(2009-2011),excess return of 5% in stable growth, EBIT margin of 24% and legal liability to the tune of 3000cr).
Under more reasonable assumptions, upside has a floor @ Rs. 214.
To slap a multiple of 15/17 is difficult for company like Satyam which has a legal liability hanging around it. Also, the high cost of capital and other idiosyncratic attributes makes it difficult to use relative valuation.
The pricing I did is a result of fundamental valuation model.
Under more reasonable assumptions, upside has a floor @ Rs. 214.
To slap a multiple of 15/17 is difficult for company like Satyam which has a legal liability hanging around it. Also, the high cost of capital and other idiosyncratic attributes makes it difficult to use relative valuation.
The pricing I did is a result of fundamental valuation model.
