February 22 2020
Why its a win-win for all
22 March 2012


Analysts gave thumbs up to the  $1.8 billion merger deal involving Tech Mahindra and Mahindra Satyam which will create India’s fifth largest software firm with projected revenue of $2.4 billion.

The merged entity’s combined size is expected to enable it a better chance of getting bigger clients, a stock market analyst said today.


“The combined entity would have a market cap to the tune of about Rs 17,000 crore and make it the fifth largest infotech company in terms of market capitalisation. With this, it stands a good chance of getting bigger business, bigger projects and bigger clients. Further, it can cater to more project verticals,” SMC Global Securities Strategist & Research Head Jagannadham Thunuguntla said.

However, he said it will take considerable effort and time for the new entity to reach the league of Infosys or TCS. “Though Tech Mahindra’s stake in Mahindra Satyam is presently to the extent of 42.7 percent, it will be interesting to observe what will be the treatment for this cross holding,” he said.

He said one way of handling this is to create a trust to hold these cross holding shares called ‘treasury shares’. “If they follow this route, then the value of these ‘treasury shares’ comes to about Rs 4,132 crore, and they can issue these shares in the future whenever they need funds.” Incidentally, this is the route that has been followed and acquisition of other companies or inorganic growth can be expected.

“British Telecom, a promoter of Tech Mahindra, will closely watch this space as they hold about 23.20 percent  stake in it. As the swap ratio is 8.5:1, British Telecom will hold about 11.11 per cent stake in the combined entity,” he said. Overall, Thunuguntla said, it is a merger which may prove to be a win-win for all the parties involved, as this enables Mahindra Group to consolidate their infotech assets under one roof.

“As said by the management, the Mahindra Satyam-Tech Mahindra merger appears to be a marriage made in heaven, and if they can execute their future business properly, one can expect the ‘honeymoon’ period to last longer,” Thunuguntla maintained.

Other analysts had similar views on the merger. “Significant duplication of corporate functions can be done away with through this merger apart from synergising sales and operations,” Destimoney Securities Managing Director and Chief Executive Sudip Bandyopadhyay said.

“A successful integration will result in significant benefit for the merged company, enabling it to break into the top tier of Indian infotech companies,”





Related Stories