Shobhana Subramanian (‘Acting in haste’, January 30) has criticised Larsen and Toubro (L&T) for increasing its stake in Satyam Computers. Her contention that enough is not known about Satyam is hardly reason enough for her criticism. This decision is strategic in nature, given what is known about Satyam. In the real world, decisions are always taken based on incomplete knowledge — what is complete knowledge of a situation anyway? This is only available in case studies in business schools.
Every situation in real life changes constantly and one has to evaluate it on the basis of the information available at any point in time. The rationale given by L&T Chairman and Managing Director A M Naik is something most of us from the industry would agree with — that Satyam has an impeccable record of serving its clients. Of course, the balance sheet of the company has been cooked — but L&T has taken a call on how bad things are, and weighed this against the much lower valuation the company is now available for. Once L&T is in favour of the deal, it is better to act quickly, else others may jump in and it may be too late.
Numerical or mathematical models present one part of the picture. Strategy, on the other hand, is about the direction an organisation plans to take over the long-term. It is precisely for this reason that managing directors are the ones who put their neck on the chopping block.
Saurabh Sharma, Chennai