Tech Mahindra set to bring back Satyam’s glory

By : |April 14, 2009 0

MUMBAI, INDIA: For Tech Mahindra, the telecommunication services and solution provider, which won the bid to acquire a controlling stake in Satyam Computer Services, this moment marks its entry in non-telecom verticals.

While addressing the media in Mumbai on Monday, Anand Mahindra, Tech Mahindra’s chairman commented, “This is a landmark development for Tech Mahindra and I am delighted that we are the highest bidder for Satyam.”

“The Mahindra Group is known for its good governance and the Tech Mahindra team has demonstrated its outstanding customer-centric focus over the last many years. I am sure that Satyam’s customers and employees will welcome this news. Looking forward, we are confident that this will lead to a positive transformation in Satyam’s business,” Mahindra added.

“Satyam has immense experience and diversified geographical presence across different verticals. Satyam’s and Tech Mahindra’s profiles complement each other,” Vineet Nayyar, Tech Mahindra’s vice chairman and CEO commented.

“After we hear the decision of the company law board, we will work with Satyam’s customers, business partners, employees and other stakeholders to restore confidence in the company and to create a platform for future growth,” Nayyar added.

Further, on future challenges, Nayyar said that the key challenge is governance of Satyam and the task is to bring the good old company back to its top level along with retaining its clients and business.

Other challenges include raising the revenue margin of the tainted company which is very low at 3 per cent, compared to Tech Mahindra’s 22 per cent. And Satyam’s annual revenues are expected to decrease from 1.8 billion to 1.3 billion dollars. Satyam has about 500 clients, while Tech Mahindra has some 200-odd clients that takes the tally to 700 clients in total as per the deal.

Following the final decision of the Company Law Board and the government on the bidding, Tech Mahindra could become the fourth largest software and IT service provider of India, from its current rank of sixth in IT industry. However, the company will have to fund Rs 2,890 crore from debt to acquire 51 stake in Satyam.

Bharat Doshi, Mahindra & Mahindra’s CFO said, “Tech Mahindra has Rs 700 crore on its balance sheet and will not require any private equity to fund the deal. We have the ability to raise debt at the SPV level and at the Tech Mahindra level. We have to pay Rs 2,890 crore at Rs 58 a share to acquire 51 per cent stake.”

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