British Telecom’s (BT) selling a 14.1 per cent stake in software company Tech Mahindra would not have any major impact on the latter’s operations.

In a filing to the London Stock Exchange on Thursday, BT said it sold 14 per cent in Tech Mahindra for about Rs 1,390 crore. The UK-based company added it may consider selling further stake in Tech Mahindra, but did not disclose further details.

“The move is slightly negative for Tech Mahindra in the near term, as the deal happened at a discounted rate. I don’t see any major impact on operating performance in the long run, even though there could be a knee-jerk reaction. On the operating front, things will remain mostly the same for Tech Mahindra,” said Ankita Somani, research analyst-IT and Telecom at Angel Broking. Business from BT would also continue to be at the same levels, Somani said.

BT’s contribution to Tech Mahindra’s revenues stood at 36 per cent of the Indian company’s total revenues as against its top five clients, who contributed 73 per cent to its revenues.

After the stake sale to institutional investors, BT – which was the second largest stakeholder in Tech Mahindra – holds just about 9 per cent.

BT has been slashing its stake in Tech Mahindra. Over the last year, BT’s shareholding in the Indian company fell to 23.16 per cent (as of June 2012) from 23.27 per cent (as of June 2011).

Better balance

“I think there is still some more space,” Ambareesh Baliga, Chief Operating Officer at Way2Wealth Brokers said, hinting at a further reduction in shareholding by BT is in the offing.

“The reports that British Telecom was looking at offloading stake always had a kind of overbearing effect on Tech Mahindra stocks,” Baliga said.

Tech Mahindra was formulated as a joint venture between Mahindra Group and BT Group plc, with each holding 44 per cent and 39 per cent, respectively.

After the Satyam scandal, Tech Mahindra had bid for Satyam Computer Services and acquired it. Early this year, the boards of Tech Mahindra and Mahindra Satyam approved a merger of the companies.

The merger is expected to take place in the second half of the year.

“The merger between the two companies will lead to a reduced dependence on BT resulting in a balanced mix of revenues from different verticals leading to lowered concerns on portfolio concentration (BT business),” brokerage Ventura said in a note.

Shares in Tech Mahindra closed at Rs 792.15, down 5.20 per cent on the Bombay Stock Exchange. On August 27, the scrip touched a 52-week-high at Rs 887.70.

(This article was published on August 30, 2012)
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