Tech-Satyam merger will give Mahindra group more span, market access

The merger of Tech Mahindra and Mahindra Satyam will create India’s sixth largest software company.

The ratio of shares in the merger - which is expected to add more value to Tech Mahindra rather than Mahindra Satyam - will be in the ratio of 17 shares of Satyam for 2 shares of Tech Mahindra.

Following the admission of accounting fraud by the founder of Satyam Computers, Tech Mahindra acquired the company in April 2009 for Rs 2,900 crore or Rs 58 per share. Markets were in fact, expecting a merger between the two companies since the acquisition.

Apart from the obvious benefits of size, investors of the merged entity will gain from a diversified portfolio and a higher number of floating stocks.

The joint entity will have revenue in excess of $2.4 billion, a client base of over 350 active clients across 54 countries and an employee strength of 75,000. Further, the shareholding of the merged entity will drastically change.

More from Business

Hyundai India’s Rs 27,870 crore IPO oversubscribed by 2.28X, largely driven by institutional investors How Indian fintech startups are driving Malaysia’s UPI-like digital payments revolution

[caption id=“attachment_251382” align=“alignleft” width=“380” caption=“After the marriage, it’s promoter the Mahindra Group will hold 26.3 percent stake.”]  [/caption]

After the marriage, it’s promoter the Mahindra Group will hold 26.3 percent stake, British Telecom will own 12.8 percent of its share, treasury stock rising on account of the merger will be 10.4 percent and 50.5 percent will be held by the public.

Currently over 90 percent of Tech Mahindra’s shareholding is held between the promoters and financial institutions.

A better free float of equity shares is usually appreciated by investors, as it increases liquidity of the traded shares - so this is bound to be a positive for the company.

Impact Shorts

More Shorts

Tata Harrier EV vs Mahindra XEV 9e: Design and road presence compared

As Trump weaponises tariff, Fed sees a bigger worry: Not jobs, but rising prices in America

The reason the deal works in favour of Tech Mahindra is that the merger brings in a diversified portfolio to the company - giving it access to multiple markets.

Tech Mahindra, by itself, was largely a telecom software provider - with British Telecom as its main client - while Mahindra Satyam had a more diversified clientele.

While the current merger ratio leaves very little on the table in terms of arbitrage opportunity, analysts are bullish on Tech Mahindra post merger.