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April 14, 2009

Satyam goes to BT-backed Tech Mahindra

Troubled services firm saved by $500 million bid

By CBR Staff Writer

Tech Mahindra, part of one of India’s largest conglomerates and a provider of IT services to the telecommunications sector, has won the battle for beleaguered services company Satyam Computer Services Ltd in a deal worth over $500 million.

The company was yesterday declared the highest bidder for Satyam with an offer valued at $351 million for a 31% stake in Satyam, with the requirement to purchase 20% more at the same price per share later. 

The bid was reported to be 20% higher than the next closest bidder, and more than double that of the lowest. 

Tech Mahindra was formed by BT and Mahindra as a joint venture in 1998, known then as Mahindra British Telecom.

BT has long been Tech Mahindra’s largest customer and is still a major shareholder with a stake worth around 30%. The two companies have penned several large service contracts and have created shared services centres together to support global customers.

Tech Mahindra, which operates out of headquarters in Pune, India and employs over 22,000 people, currently stands just outside of the top five Indian software exporters.

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It is fast growing, and a merger with Satyam will propel it into the big league. 

The company recorded revenues of INR37,661 million (approximately $935.5 million) during the fiscal year ended March 2008, an increase of 28.6% over 2007.

The conclusion of the auction brings to an end three months of uncertainty for fraud-hit Satyam, and shows its ambition of Tech Mahindra.

The company has estimated that it does not expect Satyam’s annual revenues to drop below $1.3 billion, doubling the size of the business.

From being primarily a single-client company, an expanded Tech Mahindra is well placed to compete with the top three Indian services outfits for the biggest projects, the company said.

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