VenturePay, a subsidiary of Tech Mahindra, emerged as the highest bidder for the assets of Satyam Computer Services, possibly ending one of corporate India’s most sordid tales of corporate mismanagement.
If the Company Law Board (CLB) clears the bid — according to agencies, CLB said it would clear the deal within 24 hours of receiving board recommendations — it will help Tech Mahindra leap into the big league of Indian IT sweepstakes. Its revenues will jump over three times to cross Rs 14,000 crore, taking it from No 6 slot to No 4 slot, after TCS, Wipro and Infosys.
<b1>Since the market capitalisation of Satyam crashed following the confessions of disgraced former chairman B Ramalinga Raju, Tech Mahindra’s market capitalisation will rise only by 80 per cent to a little over Rs 7,000 crore, to the No 5 rank, after the big three and HCL.
The buy, expected to cost Rs 2,890 crore, was described as “historic and game-changing” for the $300 million IT company by M&M vice chairman Anand Mahindra.
Tech Mahindra is a subsidiary of the Rs 13,238 crore Mahindra & Mahindra.
Tech Mahindra’s bid, at Rs 58.50 per share, was the highest, said Kiran Karnik, chairman of the Satyam board. The new management would decide whether to continue with the existing board, he said.
The company will pay Rs 1,756 crore for buying fresh shares in Satyam, giving it a 31 per cent stake in the company. In addition, it will pay Rs 1,134 crore to buy another 20 per cent of the company in an open offer to shareholders.
Once Tech Mahindra deposits the acquisition amount in an escrow account (for the open offer) and to the company (for issuing new shares), management control would be given over, said Deepak Parekh, member of the Satyam board. The process could be complete as early as next Monday.
Larsen & Toubro (L&T), which holds a 12 per cent in Satyam, bid Rs 45.80 per share, while the third bidder WL Ross, the US-based investor in distressed companies, bid Rs 20 a share. The US-based Cognisant decided not to participate in the bidding, Karnik said.
To raise the Rs 2,890 crore, the company would raise debt internally as well as through a special purpose vehicle. Kotak Bank would be the underwriter, said Bharat Doshi, president, finance, Mahindra group.