Mahindra Wins Satyam's Bid

Tech Mahindra, the IT arm of auto major Mahindra and Mahindra, Monday won the bid for India's fourth largest software exporter Satyam Computer.

Satyam's new board of directors, which met to select the highest bidder, chose Tech Mahindra following its bid of Rs 1,757 crore for 31 per cent stake in the scam-tainted IT giant.

Tech Mahindra offered Rs 58 for each Satyam share.

The board will now have to inform the Company Law Board (CLB) of its selection. The CLB will will announce its approval, within a week. The new owner will take over the management only after CLB's nod.

Engineering major Larsen and Toubro (L&T) and private-equity firm WL Ross were among the other major contenders for the Hyderabad-headquartered Satyam.

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L&T already holds 12.04 per cent stake in Satyam.

The six-member Satyam board is headed by Kiran Karnik, former president of the National Association of Software and Services Companies (NASSCOM) that represents the software industry.

Besides Karnik, the board comprises HDFC chairman Deepak Parekh, former Securities and Exchange Board of India (SEBI) member C Achuthan and Confederation of Indian Industry (CII) mentor Tarun Das.

Karnik said, "This is the culmination of what we have been through. The final steps are now just about to be taken and I have very happy that at this stage Satyam is with a new investor. It has been a great company which was driven off-course. We as a board tried to put the fire and get it on course and I am please to say it has got it there now. There is new captain on board and he can take it forward as it deserves to be taken forward."

Welcoming the sale of 51 per cent stake in Satyam to Tech Mahindra, Director General CII, Chandrajit Banerjee said, “Tech Mahindra, a Rs 3,800 crores company is a competent IT services provider. This would help Satyam come back to its zenith. The takeover by Tech Mahindra would also immensely help Satyam regain its shareholder value and would also benefit its employees and customers.”

Tech Mahindra, which agreed to acquire a controlling stake in Satyam Computer Services, admitted the crisis-ridden IT firm's liabilities would add to the challenges usually associated with an acquisition.

"We have taken on a challenge and we will make it work," Mahindra and Mahindra Group Vice-Chairman and Managing Director Anand Mahindra told reporters after being selected as the highest bidder for the Hyderabad-based IT firm.

Mahindra said merger and acquisition decisions were taken in the best interest of shareholders. "We will try to make it as less painful as possible," he added.

Tech Mahindra Vice-Chairman, Managing Director and Chief Executive Vineet Nayyar also admitted that the ride is not going to be smooth.

"Satyam's revenues have dipped from $1.8 billion to $1.5 billion and may come down to $1.3 billion in the next quarter," Nayyar said.

"Liabilities are there in terms of Upaid and the class action suits," he said, referring to the UK-based mobile payment operator that filed a case accusing Satyam of forgery.

"We had, however, made a fair assessment of what these liabilities would translate into. Let's hope we were right," Nayyar added.

Satyam faces the threat of paying up to $1 billion as damages to Upaid. Apart from this, a dozen-odd class action suits have been filed against it in the US.

But Chairman of Satyam's reconstituted board Kiran Karnik is optimistic.




"Satyam is a fundamentally sound company with an impressive client roster and committed employees," Karnik said at a separate media briefing.

Satyam's reconstituted board has gone all out to get some clarity on its books of accounts, which were cooked by co-founder B Ramalinga Raju over several years.

According to a company statement, Satyam's revenue stands at Rs 650 crore per month, while its operating profit is between Rs 15-20 crore per month.

The Hyderabad-based major also has immovable assets in terms of 450 acres of land, of which 125 acres are in Hyderabad alone that is house to its campuses.

The total valuation of the 125 acres is around Rs 1,700 crore.

"We are trying to get the accounts restated for the past five years starting from last quarter of 2008-09. It will take a few more months," added HDFC Chairman and a Satyam board member Deepak Parekh.