When in March 2012 the Mahindras announced that they were merging Satyam Computers with Tech Mahindra (TechM) offering one TechM share for every 8.5 Satyam shares, it was met with stiff opposition from Satyam’s minority shareholders and employees, who felt that the scam notwithstanding, Satyam’s fundamentals were much stronger than its suitor’s and the swap ratio was skewed in favour of TechM shareholders.
Many of them also felt that the Mahindras, who acquired Satyam for Rs 2,889 crore in mid April 2009, got a company of Satyam’s size dirt cheap just because of the scam. There were other suitors like AM Naik of L&T but Satyam eluded him.
Not surprising then that nearly three years after the wedding of the Hyderabad-based IT giant was solemnized with a much punier and debt laden TechM, the match has brought prosperity and fame to the groom, while the bride has pretty much faded into oblivion.
As its executive vice-chairman Vineet Nayyar had said at that point of time: “We did a survey and the overwhelming view … was that the Satyam name needs to be dropped as it was synonymous with fraud.”
He had also admitted to the win-win situation for TechM. “We are now part of the big boys. The merger gives us greater credibility in the market and the greatest advantage is that when a client looks at us, it is not just as a telco or an enterprise company but as a seamlessly functioning entity,” Nayyar had said in June 2013.
Of course, the Mahindras had to cough up over $212 million in settling Satyam’s overseas liabilities, including the suits filed by Upaid, US investors, US SEC and Aberdeen UK and US. However, the company continues to battle legal liabilities in India with the Hyderabad High Court refusing to exempt TechM from being an accused in the Enforcement Directorate’s case in the Satyam fraud. Nearly Rs 822 crore worth of Satyam fixed deposits were frozen by ED labeling them as proceeds of Raju’s crime.
Nonetheless, the merger in June end 2013 immediately catapulted TechM, which till then was a primarily telecom focused player, into India’s fifth largest IT company with a turnover of around $2.7 billion. No wonder then that analysts have been betting big on TechM, which has now emerged as one of the ‘top picks’ in IT stocks. The share process of TechM, which were hovering around Rs 170-180 per share in April 2012 have shot up over three times to nearly Rs 671 a share.
“Tech M was able to effectively leverage the strengths of Satyam, as a result of which the overall performance of the company and its stocks did much better than other IT stocks in the last two years. The skill sets of Satyam in the IT sector helped TechM not only scale up but also create a company with a presence in multiple sectors,” said Satish Kantheti, joint managing director, Zen Securities.
Today, TechM continues to be at the fifth spot in the Indian IT sweepstakes and has grown to $3.5 billion with 98,000 plus associates and a presence in 51 countries. The Satyam acquisition also gave it the confidence to not just gun for the $5 billion turnover mark by 2015-16, but also go on a shopping spree acquiring companies like Hutchison Global Services, LCC (Lightbridge Communications Corporation) and more recently Geneva-based SOFGEN Holdings Limited to boost its prowess.
