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L&T's stake sale in Mah Satyam legally untenable: Sources

Published on Thu, Aug 06, 2009 at 19:59 | Source : CNBC-TV18

Updated at Fri, Aug 07, 2009 at 14:03

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L&T seeks regulatory approval to sell Satyam stake

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CNBC-TV18 yesterday reported that India's largest engineering and construction conglomerate Larsen & Toubro was seeking regulatory approval to sell its 6.9% stake in Satyam. In a latest development, Ministry of Corporate Affairs (MCA) sources have informed CNBC-TV18 that the company would need the Company Law Board's (CLB) nod for the stake sale in Mahindra Satyam . However, it has also been reported that L&T had not yet moved CLB on the issue of stake sale. L&T's stake sale in Mahindra Satyam is legally untenable, sources said, adding, this would have its implications on the capital market. Pranshu Sikka reports.

Meanwhile, JP Nayak, Board Member, L&T and President - Machinery and Production, L&T, however, said that the company was not talking to Mahindra Satyam for a sale.

He said, "At this point of time I can tell u that we are not in talks with the Mahindra board for selling our stake in Mahindra Satyam." He added, "At this point we would like the restraint that is there on us to be removed so that the treasury department will be at a liberty to decide as and when they would like to alienate that stake. It does not mean that we are going to do it tomorrow or day after tomorrow, it may happen at any point of time in future but we should have that facility."

Here is a verbatim transcript of his report on CNBC-TV18. Also watch the accompanying video.

L&T will need more than one nod and it doesn't look like it will be easy to get those nods either. Sources in the Ministry are saying that not only does L&T need a CLB approval which they haven't applied for-that's what sources are saying, they also say that it would not be easy to wave off the agreement clause.

Two reasons which define the logic behind this is, firstly, they say that an agreement based on where and as basis is anyways difficult to change. Secondly, offloading the 12% L&T holds right now in the company might have capital market implications for the scrip which is just beginning to show signs of a turn around, something which may not go down well with the Ministry, which has itself toiled hard to revive the company.

But if this thought goes behind the legal stand, which the Ministry takes as and when the matter comes before CLB, then it could well get tricky for L&T to push for a change in the clause agreement.

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