BT sells out of Tech Mahindra

Ending its participation in the joint venture with Indian industrial conglomerate Mahindra & Mahindra that was the forerunner of the offshore services firm now known as Tech Mahindra,BT has sold its remaining 9.1% holding at Rs871 per share, grossing £116m. The business, which started life in 1986 as Mahindra BT, still depends on BT for one-third of its revenues, about half the level compared to 5 years ago. Tech Mahindra’s shares have since risen 5%. BT sold down the majority of its remaining stake in Tech Mahindra back in August (see here) at Rs778 per share and at the time I wondered whether they shouldn’t have dumped the lot as it seemed a good price. Just as well they didn’t listen to me (Ed: Don’t give up your day job, Miller!).

The exit makes sense for both parties. Back in 1986 there was no ‘offshore services’ market to speak of and it was prescient of BT to in effect create one for itself. Obviously it’s quite a different world today and BT makes significant use of India-based offshore services with a number of the leading players besides Tech Mahindra. Meanwhile, Tech Mahindra is now unshackled from its leading client as it prepares for the long-awaited consummation of its marriage with born-again Satyam. Management’s attention is still diverted by the various investor claims and class action suits against the Raju-era incarnation of Satyam, and has just settled a $68m suit with Aberdeen Global and other funds.