As mooted in the media earlier this month (see Mahindra Satyam, Tech Mahindra move closer), telco-focused offshore services firm, Tech Mahindra and sibling offshore enterprise IT & business process services firm, and now born again, Mahindra Satyam, are to exchange vows – and indeed shares – in holy matrimony.
I am long since out of the equities research game so will refrain from taking a view whether the share swaps are a good deal for investors. But the result will reduce BT’s holding to just under 13% (BT was Indian industrial conglomerate Mahindra & Mahindra’s JV partner in the erstwhile Mahindra BT – today’s Tech Mahindra).
But for me this is not the issue. The issue is whether the marriage will work in practice. When the paperwork is complete (I can’t see a date mentioned at the moment) the combined entity (also no new name mentioned – but ‘Tech Mahindra Satyam’ would be a heck of a mouthful) will have a nominal run rate of some $2.4b. BT is Tech Mahindra’s top client, and contributed some $440m in revenues during 2011, and will therefore remain top client of the merged business, accounting for around 18% of turnover. The merged business will obviously have a heavy skew to the telco sector, with Tech Mahindra’s $1.15b total revenues essentially all from that segment.
I am meeting Mahindra Satyam European management soon and hope to get a better idea of how this marriage will work in practice in our neck of the woods.