Posts Tagged ‘Satyam’

Satyam is no more; to live on as part of Tech Mahindra

July 15th, 2013

Once a darling of the Indian IT sector and the stock market, the scam-hit erstwhile Satyam has formally ceased to exist as an individual entity by formally merging with Tech Mahindra. Outsourcing5

Its journey saw a fraud bringing down the company’s valuation by over 95 per cent within weeks, while a subsequent revival brought in an over 10-fold surge from the dumps.

Still, it is the remains of this once scam-hit company on which its saviour Tech MahindraBSE -0.29 % will bank upon significantly to move up the ladders of the Indian IT sector charts, say industry experts.

After debuting on the stock market in 1995, Satyam soon went on to become one of the country’s top five IT companies and its share price was trading Rs 250 level in late 2008.

It came to be known by January 2009 that Satyam (a Sanskrit word that means truth) was home to India’s biggest ever corporate scam, admitted to by its own founder and then Chairman B Ramalinga Raju, and the scandal broke the company’s share price to as low as Rs 11.50.

A quick revival, however, followed with its takeover by Tech Mahindra through a government-monitored auction process and its name was changed to Mahindra Satyam.

Tech Mahindra on Friday announced the completion of allocation of its shares to the shareholders of Satyam Computer ServicesBSE 0.00 %, raising the issued capital of the firm from 129 million shares to 232 million.

Many changes have come through under Mahindras and the group finally decided to amalgamate the two IT companies under its fold. Shares of Mahindra SatyamBSE 0.00 % are no longer traded on the bourses.

They last traded at a level close to Rs 120 a piece and the value of each erstwhile Satyam share is now equivalent to about Rs 130 a piece, taking into account Tech Mahindra’s current share price of Rs 1,120.

As per the merger ratio, two Tech Mahindra shares have been given for every 17 shares held by Satyam investors.

Experts say it made sense for the new owner to drop the Satyam brand name from the business, given its infamous past.

CapitalVia Global Research Head of Research Vivek Gupta said: “The good thing to cheer for the investors is that now they own a stake in the company which is much more clean in all the aspects and is amongst the top-five IT companies.”

Following the integration, Tech Mahindra is now amongst the top-5 IT companies of India with revenues of USD 2.7 billion and expects it to rise to USD 5 billion by 2015.

“Satyam was at the brink of non-existence a couple of years back for reasons known to all. Tech Mahindra took its reins after the fiasco and brought the company back into life,” Ashika Stock Broking Vice President Equity Research Paras Bothra said.

The integration of two entities makes it a much larger software company and will also aid in cracking and winning larger outsourcing contracts.

“We remain optimistic with Tech Mahindra’s ability in generating long term shareholders wealth,” Bothra said.

CNI ResearchBSE -4.58 % CMD Kishor P Ostwal said: “I see a bright future for the company after its merger with Tech Mahindra. Tech Mahindra is emerging as a more stronger player and the outlook is very bright.”


Coaliton may embrace IT outsourcing: report

May 21st, 2013

Tech industry leaders are expecting a Coalition government to embrace IT outsourcing like never before in a bid to reduce operating costs.

According to The Australian Financial Review, the strategy is not new but hasn’t been aggressively pursued by the government. Indian IT companies like Tata Consultancy Services (TCS), Mahindra Satyam, Infosys, Wipro and HCL have largely missed out on Australian government tenders due to a pervading fear among the public service that they may end up replacing local jobs.outsourcing2

However, this approach may change when it comes into power and attempts to find $75 billion worth in savings.

To this point, the director of Sydney-based outsourcing specialist Mindfields, Mohit Sharma told the AFR that the Australian government spends comparatively more than both the British and US governments due to inability to harness IT outsourcing.


All Mah Satyam claims cleared post Aberdeen deal: Nayyar

December 13th, 2012

British telecom giant BT offloaded 9.1 percent stake in Tech Mahindra   for Rs 1,011.4 crore on Wednesday, exiting from the Indian IT services firm.

Vineet Nayyar, vice chairman, Tech Mahindra told CNBC-TV18 that though BT’s IT budget is coming down, but Tech Mahindra still remains their preferred partner.Vineet_Nayyar_1-190

“A share of BT’s wallet on technology spend is growing as a percentage. Their reliance on our services is increasing as the percentage grows, but in absolute terms the inflow of money has come down marginally and could go down further a little bit,” he elaborated.

BT had set up the technology outsourcing firm in joint venture with Mahindra & Mahindra in 1986. The British company had around 30 per cent stake in Tech Mahindra initially.

Meanwhile, Mahindra Satyam   has settled claims from Aberdeen Global and 22 funds that had claimed damages, which were to the extent of USD 298.3 million.

Vineet Nayyar who is also the chairman of Mahindra Satyam said, “All claims with respect to Mahindra Satyam are cleared post Aberdeen Global deal and all external litigations are behind the company now.”


Satyam Eyes Outsourcing Deals in U.S.

June 28th, 2012

Satyam Computer Services Ltd. is chasing several large outsourcing contracts in the U.S. — its largest market — despite clients cutting technology budgets because of the global economic turmoil.

Satyam is working on a pipeline of 17 or 18 deals worth more than $30 million each, Lakshmanan Chidambaram, who heads sales and operations for the Indian information technology company in North America, said late Tuesday.

He added that, in the April-June quarter, the company converted pipeline deals into actual revenue “reasonably well.”

He didn’t elaborate.

Mr. Chidambaram said also that, unless the global economic situation worsens and clients pull back investments, sales growth in the Americas in this fiscal year through March 2013 is likely to outpace the previous year’s 12%.

The Americas accounted for 51% of the Hyderabad-based company’s $1.31 billion revenue in the fiscal year ended March 31, 2012.

The comments support Satyam’s assertions of a recovery from an accounting fraud that had pushed it to a near collapse in early 2009. Satyam has since been taken over by outsourcing company Tech Mahindra Ltd. and has restated some of the past financial statements. The lack of credible financial statements was a major drawback that limited its ability to chase large outsourcing orders in the U.S.

Mr. Chidambaram’s views contrast, however, with the cautious management commentary on IT services demand from Satyam’s larger rivals like Infosys Ltd. and Cognizant Technology Solutions Corp. owing to subdued business sentiment amid global economic uncertainty.

Clients are focussing on cutting costs and are hence investing only in projects which are absolutely critical to run the business, Mr. Chidambaram said. The largest deal in the pipeline it is chasing is worth about $110 million spread over three to five years.

Infosys and Cognizant target technology projects that are typically longer-term and larger in value and aim to help clients transform business. Though these projects are more discretionary in nature, outsourcers can charge higher billing rates and make higher profits from them.

Spending on discretionary projects has completely dried up, Mr. Chidambaram said, adding that none of the large projects it is chasing now are discretionary in nature.

Satyam is seeing demand for cost-cutting projects from customers in the aerospace, retail and financial services segments, he added.


After Cognizant, Mahindra Satyam to fund employee ideas

May 16th, 2012

When outsourcing services provider Cognizant Technology Solutions launched Cognizant Capital in 2008 to encourage entrepreneurial spirit among employees, they may not have expected rivals to follow suit.

Now, Cognizant’s Hyderabad-based peer Mahindra Satyam has created an entrepreneurial fund that will help employees execute ideas that could eventually contribute to company’s revenues.

Employees with ideas can approach the firm’s board, which will whet ideas and recommend selected ones to be funded with not just financial capital but also human capital.

“Young employees are well equipped to provide new services as a product in the areas of e-commerce and mobility. So, instead of them quitting to start their own venture, this allows them to pursue it while being part of Satyam,” Manish Mehta, chief vertical solutions officer said.

For now, Satyam has set aside about $8 million or about Rs 43 crore for this programme, where in employees get about a year’s time to get the venture to start contributing to Satyam’s topline. Only ideas, with potential to fetch revenues of $10 – $12 million annually will get funding.

The average investment ploughed into each idea would be around $2 million. Satyam expects to get about three to four good ideas by the end of this year. “We recognise the need to propel young associates with a hungry mindset,” said Hari T, head of human resources.

“This will not only help us broaden our bandwidth of service offerings, but also aid us in increasing revenues.” Interestingly, new Satyam is inadvertently taking a leaf from its earlier promoter B Ramalinga Raju, who had a similar programme, back in 2002.

Mehta, who is driving this initiative for Satyam said: “Having supported the business model, we will have to take on the risk of failure and the employees will be given the option of getting back to their previous roles within the organisation”.

Dipen Shah, Institutional Head, Kotak Securities said: “This is similar to the incubation fund that Infosys had many years ago where companies such as On Mobile were supported. It not only helps them to increase profitability through these ventures enabling them to bag more deals in new areas like social media but also helps in retaining talent within the firm by encouraging entrepreneurship”.

Patni Computers too had a similar programme for its employees before it merged with iGate. Cognizant’s Sukumar Rajagopal, a senior vice-president and global head of innovation, said that such incubation is becoming increasingly important when customer requirements can only be met through innovation.

Cognizant follows a distributed model of innovation where every employee is encouraged to innovate in the organisation. Cognizant has an internal board that screens, selects and reviews business plans, allocates funds and/or resources in a staged model patterned after the Silicon Valley venture capitalist firms.

Prominent among such ideas is Cognizant 2.0 or C2 that provides a virtual “town square” for more than 140,000 Cognizant associates and over 100,000 active users who collaborate on hundreds of projects worldwide.


Mahindra Satyam’s Australian unit aims to hire 5, 000 by 2015

March 29th, 2012

Mahindra Satyam’s Australia unit plans to make acquisitions worth $50-100 million and become a $750-million company by 2015, a media report has said.

“We’re on the lookout for major acquisitions, anywhere from $50 million to $100 million. The treasure trove is reasonably big and Australia is a big market for us on a worldwide basis,” Mahindra Satyam Head (Australia and New Zealand operations) Venki Prathivadi said in an interview to ‘The Australian’.

Earlier this month, the diversified Mahindra Group announced the long-awaited merger of Mahindra Satyam with its another technology arm Tech Mahindra in an all-share deal that would create India’s fifth largest software firm with an estimated annual revenue of about $2.4 billion.

Speaking on the Australia and New Zealand operations, he said, “Our business is one of the most profitable in the Mahindra Satyam group. With the profits that we have generated and the growth standards that we have here, we’re looking for acquisitions in banking and financial services, healthcare, mining.”

The company is also looking at ramping up hiring with special focus on building domain skills, he added.

“Business had never been better, and it had even cracked the lucrative federal government market. By 2015, the goal is to have 5,000 employees and the objective is to be a $750 million company,” Prathivadi said.

“We doubled in revenues over the last three years and the objective is to double again in the next three years.”

After the merger with Tech Mahindra is completed this year, 80 per cent of the employees would cater to Australian customers, it would have 2,250 staff in Australia and New Zealand.

Despite troubled times, the company added 15 new customers in one year’s time, the report quoted him as saying.

“We’ve set ourselves a goal of finding one new customer every month,” he said, adding, “This is a local target…It’s a goal I set. We’ve been doing very well with existing business, but we had to do this in terms of real recovery. Major customers include Qantas and National Australia Bank”.

Prathivadi said that Satyam was working with unnamed Canberra-based companies to deliver services to public-sector users. The company also aims to hire at least 100 people to be based in Canberra.

He said an aversion to using India-based IT outsourcing companies was changing in Canberra, due to the “competitive advantage that we bring”.

Prathivadi claimed that one of Satyam’s strongest weapons was its ability to deliver quality work for 30 per cent less than its rivals and that people with SAP, Microsoft and Oracle technologies would be highly sought after by Satyam.

It hopes to dip into a “reasonably big” treasure trove to acquire local companies but not necessarily in the IT space.


Satyam & TechM merge to form $2.4bn IT co, 5th largest in India

March 23rd, 2012

The $14.4-billion Mahindra Group on Wednesday unveiled the widely anticipated merger of its two IT services firms, Tech Mahindra and Mahindra Satyam, creating a $2.4-billion entity, which is poised to be India’s fifth-largest software outsourcing company by revenue. The development comes three years after the group acquired the scandalrocked Satyam Computer Services, later branding it Mahindra Satyam.

As part of the merger, investors will get two Tech Mahindra shares (of Rs 10 face value) for every 17 shares of Mahindra Satyam (of Rs 2 face value). The group will own 26.3% in the combined entity while British Telecom , a strategic partner of the group in Tech Mahindra, will hold 12.8%. Since Tech Mahindra currently holds 42.65% in Mahindra Satyam (through Venturbay Consultants ), 10.4% equity of the new entity that will come in existence because of this cross-holding , post merger, this equity will be held as treasury stock in a trust, said the management at a press briefing in Mumbai on Wednesday.

Following the announcement, Dalal Street gave its stamp of approval to the plan with Tech Mahindra stock closing up 5.5% at Rs 684 while Mahindra Satyam (still listed as Satyam Computer on the bourses) closed 4.6% up at Rs 78. At the day’s closing levels, the two entities together are valued at a tad over Rs 17,800 crore (about $3.5 billion ).

The new entity, the branding of which will be decided over the next few months, will compete with the likes of Tata Consultancy Services, Infosys and Wipro for bagging big international outsourcing contracts. Tech Mahindra will issue 10.34 crore new shares, increasing its number of outstanding shares to 23.08 crore and its equity capital to Rs 230.8 crore, said the management. This values Satyam at Rs 76.3 a share ($1.8 billion), according to Bloomberg.

“This merger does not bring about any cost savings. Instead, it’s driven by the proposition of delivering better value to our customers, and project the power of one,” said C P Gurnani, CEO, Mahindra Satyam.

The management said there will be zero redundancies post merger but did not rule out some redeployment at the leadership level across functions. Mumbai will be the new headquarter for the merged entity. “We did the merger when Mahindra Satyam reached normalization and was in a steady state so that it’s a merger of equals,” said Vineet Nayyar, vice-chairman & MD, Tech Mahindra and chairman, Mahindra Satyam. The joint entity will have a unified goto-market strategy with revenues spread across telecom, manufacturing, media & entertainment, banking and insurance, along with retail and healthcare.

The new entity will leverage Tech Mahindra’s expertise in the mobility vertical while Mahindra Satyam’s diverse clientele will come in handy to widen the client base of the company. “This makes strategic sense for Tech Mahindra, giving it access to other verticals, scale benefits and a wider geographic presence,” said Citigroup analysts in their report on Wednesday.


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