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Tech Mahindra wins over Satyam - Views on News from Equitymaster
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Tech Mahindra wins over Satyam
Apr 13, 2009

After more than three months of confusion and speculation, Satyam finally got its new owner today in the form of Tech Mahindra, selected through a competitive bidding process. L&T and Cognizant-Wilbur Ross were the other two contenders in the fray for the beleaguered IT firm but Tech Mahindra out bid them with a comfortable margin. The company (through its subsidiary Venturbay Consultants Pvt. Ltd.) will now pay Rs 58 per share to buy a 31% stake in Satyam through a preferential allotment. L&T and Cognizant-Wilbur Ross, on the other hand, had reportedly put in their bids at Rs 45.9 per share and Rs 20 per share respectively.

Tech Mahindra will subscribe to 302,764,324 shares of Satyam on payment of a consideration of around Rs 17.7 bn. Tech Mahindra will then have to buy an additional 20% of the shares through an open offer. The company, in totality, will have to pay around Rs 28.9 bn for a 51% stake in Satyam. After this stake sale, Satyam’s fully diluted equity capital base will stand at around 976 m shares, around 45% higher than the current levels.

The selection of Tech Mahindra marks a new phase of life for Satyam. In fact, it is a major development towards stabilisation of the company post the Raju scandal erupted at the end of last year. The company can now try and reposition itself under the aegis of a new owner. Tech Mahindra will help in reviving the commitment for good governance. This will impart greater confidence to customers, who are continuing with Satyam despite the scandal. Furthermore, this event will go some way in dispelling the apprehension of stakeholders.

As for Tech Mahindra, this win is expected to help the company in diversifying its software services business which is currently focused more towards telecom vertical. Satyam, as a matter of fact, has a much diversified portfolio as the company offers its services to industries like financial services, manufacturing, telecom, infrastructure, media, semi-conductor, healthcare, retail, and logistics, among others. Furthermore, Tech Mahindra will also get in fold some marquee clients that are currently being served by Satyam.

Given that the deal is just into its initial stages, we shall keep you posted on the future happenings with respect to the same (the deal) as also our view on Tech Mahindra.

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