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Tech Ma, Satyam merge

Tech Mahindra and Mahindra Satyam announced a Rs 5,150-crore merger plan that would ring the curtain on India's biggest corporate fraud that sent the former Satyam Computer Services into a crisis. Shrenik Avlani reports. Reborn, with muscle

business Updated: Mar 22, 2012 01:39 IST
Shrenik Avlani
Vice-chairman-and-managing-director-of-Tech-Mahindra-Vineet-Nayyar-R-speaks-as-director-and-chief-executive-officer-of-Mahendra-Satyam-CP-Gurnani-looks-on-during-a-press-conference-in-Mumbai-AP-Rajanish-Kakade
Vice-chairman-and-managing-director-of-Tech-Mahindra-Vineet-Nayyar-R-speaks-as-director-and-chief-executive-officer-of-Mahendra-Satyam-CP-Gurnani-looks-on-during-a-press-conference-in-Mumbai-AP-Rajanish-Kakade

Tech Mahindra and Mahindra Satyam on Wednesday announced a Rs 5,150-crore merger plan that would ring the curtain on India's biggest corporate fraud that sent the former Satyam Computer Services into a crisis, and usher in a new software behemoth that will be India's fifth largest IT exporter.

Shares of both firms surged by about 5% after the boards of Hyderabad-based Mahindra Satyam and Pune-based Tech Mahindra approved a stock swap under which Mahindra Satyam shareholders will get two shares of Tech Mahindra for every 17 shares they hold.

"Satyam has reached normalization and a steady state... it is now a merger of equals," said Tech Mahindra's vice-chairman, Vineet Nayyar.

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The company is likely to be renamed, though the details are not clear, and the merger, effective from April 1, is expected to be completed in nine months.

The merged company will have revenues of $2.4 billion (Rs 12,150 crore), 75,000 employees, presence in 54 countries and 350 active clients.

The combined entity will rank after Tata Consultancy Services, Infosys, Wipro and HCL Technologies in the pecking order of Indian IT. If, Cognizant, headquartered in the US but effectively an Indian company, is counted, it would rank ahead of Wipro and push the Mahindra entity to the sixth spot.

Satyam was India's fourth largest IT exporter before it tottered after founder-chairman Ramalinga Raju, currently on trial, admitted to cooking books.

Nayyar indicated that CP Gurnani, currently Mahindra Satyam's CEO, was expected to lead the new entity to be headquartered in Mumbai.

"Except Gurnani, no other name comes to my mind for leading the new company," said Nayyar, who is currently Tech Mahindra's managing director.

"There will be zero redundancy in staff, in fact we will be hiring more because both companies are on a growth path. By the time the merger is cleared, the company's revenue would be $3 billion," said Gurnani

Mahindra Group's share in the combined entity will be 26.3%, while British Telecom will own 12.8%, while 10.4% will be held by a trust as treasury stock.

Tech Mahindra CFO Sonjoy Anand, a key figure in the company, is likely to be named the CFO in the new team as well.