Hy derabad: A group of minority shareholders of Satyam Computer Services Ltd have questioned the timing of the proposed amalgamation of the company with its parent Tech Mahindra Ltd and alleged that it was done deliberately to influence the merger in favour of Tech Mahindra shareholders.

Satyam, which was rebranded as Mahindra Satyam, announced it would merge with Tech Mahindra, the information technology arm of the Mahindra group, on 21 March 2012.

The minority shareholders are objecting to the 2:17 share swap ratio—two shares of Tech Mahindra for 17 shares of Satyam—determined by the company’s management, and have filed a petition asking the court to look into it.

They, however, were not opposing the merger that will produce a $2.4 billion entity, and possibly the sixth largest Indian software services company, dominated by Tata Consultancy Services Ltd, Cognizant Technology Solutions Corp., Infosys Ltd, Wipro Ltd and HCL Technologies Ltd.

A lawyer representing the shareholders said Mahindra Satyam management had prior knowledge of the financial performance of the company by 21 March and had deliberately chosen the date to announce the merger.

If the company had announced its merger after 31 March, by which time the financial year would have ended, it would have had to take FY2012 results into consideration while deciding the merger swap ratio, the shareholders contended.

“If the appointed date was 1 April, the position would have been totally different… The whole exchange ratio would have changed. The figure would have gone up," senior advocate Sudipto Sarkar told the court, arguing on behalf of the minority shareholders.

Sarkar pointed out that the revenue of Satyam Computer increased by 1,250 crore from March 2011 to March 2012, while the earnings per share turned positive by 31 March 2012.

He also brought to the court’s notice that Satyam clawed back to net profit of 1,306.06 crore in FY11-12 after registering a loss of 147.23 crore during FY10-11, the period under consideration while deciding the swap ratio.

Sarkar also pointed out that the value of the current assets of the company has increased by 11.5% to 5,567.85 crore in the 12-month period. “I submit that the scheme is unfair," Sarkar told the court.

Consulting firms Ernst and Young Pvt. Ltd and KPMG India Pvt. Ltd advised the two firms on the share-swap ratio.

A lawyer representing some companies that allegedly lent various sums to Satyam Computer during the chairmanship of B. Ramalinga Raju, who confessed to an accounting fraud in January 2009, objected to the unsecured creditors being branded as “Raju companies".

He said that the new management has been unable to conclusively prove “round tripping" has taken place at Satyam during 2003-09 despite spending 70 crore on a forensic audit.

Referring to the investigative reports of various agencies such as Central Bureau of Investigation and Serious Fraud Investigation Office (SFIO), the lawyer S. Niranjan Reddy said, “not a single rupee has flown out of Satyam into other companies" but instead money has flowed from other companies into Satyam but was not reflected in its accounts.

Irrespective of the financial fraud perpetrated by Raju, the lawyer said his client’s right to receive the money was not extinguished. “It is my money that is being held by Satyam. Satyam is in unlawful possession of those funds," he argued.

Mahindra Satyam’s lawyers are likely to counter the charges at the next hearing on 22 April.

The Andhra Pradesh high court has clubbed the petitions of the minority shareholders and alleged creditors with the merger petition.

The scheme of amalgamation has been cleared by various bodies, including the Competition Commission of India, BSE, National Stock Exchange and the Bombay high court, and is pending only in the Andhra Pradesh high court. The Bombay high court sanctioned the merger application of Mahindra Satyam and Tech Mahindra subject to approval by the Andhra Pradesh high court.

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