The Hindu Business Line : ‘Satyam’s client attrition was limited to 35%’

Mumbai, May 3 Around 35 per cent customers of Satyam Computer Services had snapped ties with the company since its ex- chairman Mr B. Ramalinga Raju admitted to a financial fraud of over Rs 7,000-crore earlier this year.

“…It (Satyam) has a great rapport with its clients and that is why the client attrition was limited only to 30 per cent or 35 per cent. One would have otherwise imagined that with these implosions almost every client would have left,” Mr Vineet Nayyar, Managing Director & CEO of Tech Mahindra, said in a recent conference call with analysts.

As on September end, the Hyderabad based software firm, which was recently acquired by Tech Mahindra, had more than 600 customers. Incidentally, soon after the fraud came to light, research firm Forrester had predicted that around 30-50 per cent of Satyam’s clients would review their deals with the IT firm.

Recently, there were reports that several customers of Satyam, including Coca-Cola and the State Farm Insurance company in the US, had terminated their contracts with Satyam in the last four months.

However, some other high profile customers of Satyam-such as Ciba, FIFA and Nestle-have reposed faith in the software company.

Meanwhile, Tech Mahindra has said that it will continue to operate Satyam as a standalone entity at-least for the next two years.

‘Traumatic’ months

“We believe that Satyam and its very loyal clients have gone through an incredible trauma for the last four to five months. Any merger in itself results in a fair amount of dislocation. We did not want to cause that dislocation to these clients,” he told analysts.

However, the company will announce management changes at various levels in the company – including the appointment of a new Chief Financial Officer – in the next few weeks.

Last month, Tech Mahindra had agreed to pay Rs 2,889 crore for a 51 per cent stake in Satyam, through a special purpose vehicle (SPV) called Venturebay Consultants. In order to finance this acquisition, the company has taken an overall debt of Rs 2,000 crore at an average coupon rate of around 11 per cent, Tech Mahindra` Chief Financial Officer, Mr Sonjoy Anand, told analysts.

“We have a combination of debt. Quite a lot of it is longer term. Some of the debt is at the Tech Mahindra level and some is at the SPV level,” said Mr Anand.

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