Tech Mahindra, which is a joint venture between Indian firm Mahindra & Mahindra and British Telecom announced a bid that can salvage the scam-tainted company at $ 1.2 billion. This enables the sixth largest Indian outsourcer to wrestle market share from prominent local outsourcing competitors like Wipro, Infosys Technologies and Tata Consultancy services.
Tech Mahindra has overtaken Larsen & Toubro, which holds 12% stake in Satyam, in its bid by offering 58 rupee or $1.16 per share bid for 31 percent of the company.
“The selection of the highest bidder, in fair and transparent process, signals a new phase for the company in its progress towards growth and stabilization,” said Kiran Karnik, chairman of Satyam’s board and hoped that this will instill greater confidence among customers and investors.
Three months ago, Satyam’s chairman and founder shocked investors by admitting that he had overstated profits for many years and inflated the company’s operating margins. It was later found out that a team in finance department was responsible for churning out fake invoices and bank statements.
Tech Mahindra, which provides information technology services to the telecom industry, has less than half the workforce of Satyam. More than half of the company’s business comes from one client, British Telecom, which owns a minority stake. The deal would enable the company to venture in new industries from manufacturing to financial services.
Satyam which means “truth” in Sanskrit, had around 53,000 employees and a market capitalization of over $7 billion. It was one of India’s biggest information technology companies and one of India’s fourth-largest software services exporter. Even considering the fact that Satyam is a very badly managed firm at a revenue run rate of $1.6 billion it should have garnered profits of around Rs 1,000 crores ($200 million).