Finally, the excitement over who will win the Satyam bid is over. It is Tech Mahindra, another leading Indian IT firm that has bought 31 per cent of the company for Rs 1,757 crore. It has to deposit the money in the next four working days and then the Company Law Board (CLB) will be approached by the Satyam board to complete the process. There were other prospective industry stalwarts in the fray — Larsen & Toubro, US-based Wilbur L Ross, Cognizant and the BK Modi-controlled Spice Telecom. While L&T and Wilbur Ross bid, the remaining two stopped short of bidding.
Ever since the promoter of Satyam admitted to fraud in January this year and a government-appointed board took over, there has been constant interest across industry and media about how the company can be rescued. At stake was the larger issue of Indian corporate governance practices at a time when the global economy was in a downturn and there were strong fears that the Indian IT industry, which depends a lot on the West, could be impacted. However, the interim board of Satyam handled the situation well and invited bids to sell 51 per cent of the company — 31 per cent through auction and another 20 per cent in an open offer. It was able to organise the much-needed Rs 600 crore from public sector banks and actually drew down half that amount till date. Most of the clients of Satyam remained with it and it was able to pick up a few new orders. The most significant fact being it remained among the top five Indian IT companies.
The Tech Mahindra acquisition of Satyam is the best thing that could have happened at this stage to both companies. Tech Mahindra is in the niche area of telecommunications and billing solutions but it has a good team to delve into other areas like defence communications and its expansion was on the horizon. Satyam had a good business in place and had spread its wings across verticals. However, the scam and the revelations with each passing day in the last couple of months had left
the company and its human resources in a state of flux. With Tech Mahindra as the winning bidder, it will be useful for the special purpose vehicle (SPV) to reorganise business practices and get the most out of the resources of the combined entity. The SPV will also have to handle a number of class-action suits filed against Satyam.
The transparent acquisition will present a very nice picture of corporate governance practices in Indian industry. This is essential as a lot of companies in the Indian IT industry have stakes in the global software and outsourcing market. Many critics of the Indian IT industry have been trying to paint a not-so-nice picture of their business practices. The bidding process and the support from the government and industry have sent the right signals to global industry, which will look at more Indian companies for software development in the face of recession.
It remains to be seen how soon the CLB gives its assent to the process and when Satyam gets back on its feet. For Tech Mahindra, it will be hard work from day one and it will definitely be able to move things in the right direction.
Subimal Bhattacharjee is Country Head in India for General Dynamics. These are his personal views