Hyderabad: Satyam Computer Services Ltd will remain an independent company with a new executive team at the top as it crawls back to profits, Tech Mahindra Ltd (TechM), the winning bidder for the fraud-hit firm, said on Monday.
TechM chairman Anand Mahindra told reporters in Hyderabad he was confident about Satyam’s future. “It (Satyam) is not a sinking ship. It may not be a racing craft yet, but we are well on our way to a viable future.”
Tech Mahindra chief executive Vineet Nayyar, who has been in Satyam’s Hyderabad campus the past four days interacting with the firm’s top executives, said Satyam had been able to retain a major proportion of its business despite “the tsunami that hit”.
Confident move: Chairman of TechM Anand Mahindra at a press conference in Hyderabad on Monday. Krishnendu Halder / Reuters
“We are very excited about Satyam’s potential,” Nayyar added.
He ruled out merging Satyam with TechM in the near term. He also said the Hyderabad company would have a new chief financial offer, who will be appointed in the next few weeks. Satyam’s current chief executive A.S. Murty will remain in his position, Nayyar said.
Satyam has seen employees and customers leave and has become the subject of a federal investigation after its founder B. Ramalinga Raju disclosed on 7 January that he had fudged the company’s books to the tune of at least Rs7,136 crore over several years.
TechM, a joint venture between UK’s BT Group Plc. and auto manufacturer Mahindra and Mahindra Ltd (M&M), outbid Larsen and Toubro Ltd and billionaire investor Wilbur Ross last week in bidding for Satyam, offering Rs58 a share for a 31% stake in the company. On Tuesday, TechM will offer to buy an additional 20% stake in Satyam through an open offer as required by Indian law.
Towards this, TechM has deposited Rs2,910 crore in an escrow account, including Rs1,756 crore for the 31% stake and Rs1,154 crore for the open offer. Of this, Rs700 crore is from the company’s own funds, while the balance was raised as debt.
About Rs875 crore was raised by issuing non-convertible debentures and commercial papers, which were subscribed by mutual fund houses and insurance companies. The remaining debt was raised from non-banking financial companies.
“All the resources required (for the deal) were raised from the local market within 72 hours (of the company emerging the highest bidder) from non-banking sources,” Mahindra said.
Analysts tracking the deal say the funds raised in local market could be costly and affect TechM’s profitability.
“We believe that with the backing of the parent group (Mahindra—a reputed name in the Indian context), TechM would be able to raise the necessary funds for this acquisition.
However, the debt servicing is likely to strain the P&L (profit and loss account) as we believe that funds raised in the Indian markets will not be cheap,” Surendra Goyal and Vishal Agarwal, analysts with Citi Investment Research of Citi Global Markets, noted in a report to clients on Monday.
As for Satyam’s employees, Nayyar said a team had already been formed to deal with the transition of management. On reports that Satyam had an excess head count of 10%, or 5,000-6,000 employees, Nayyar said it was too early to comment on the subject.
The immediate priority for the TechM leadership is to ensure clients are convinced to stay with Satyam and to regain clients who have taken their businesses elsewhere, he added.
On Monday, shares of Satyam rose 4.51% to close at Rs47.55 each on a day the benchmark index of the Bombay Stock Exchange, Sensex, fell 0.4% to 10,979.50 points. TechM shares fell 0.3% to Rs333.65.