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Shares of Mahindra Satyam and Tech Mahindra surged on news of their merger.
Analysts have given a “thumbs up” to the merger and said the share swap ratio was in line with market expectations.
The stock of Tech Mahindra closed at Rs 683.90, up 5.48 per cent from its previous close on the BSE. Satyam Computer Services closed at Rs 77.55, up 5 per cent from its previous close.
“The share swap of 2:17 (Tech Mahindra to Mahindra Satyam) was bang on line. Equal weightage to both the companies has been given in terms of deciding the ratio,” said Mr Gaurang Shah, Assistant Vice-President, Geojit BNP Paribas Financial Services. “As far as investors are concerned, Tech Mahindra shares would be a better buy,” he said.
A report by SMC Global Securities said, “the swap ratio close to 9:1 appears to be “value” decretive for shareholders of Mahindra Satyam and “value” accretive for shareholders of Tech Mahindra.”
Cash surplus
As the combined entity has a net cash surplus of Rs 1,800 crore and will be fifth largest service provider in terms of market capitalisation, Mr Shah feels that the company needs to design a good business revenue model.
“There is a huge scope to scale up, introduce new products and thereby increase their revenues.” “The share swap ratio is in line with expectations. Based on yesterday's price, the ratio is in favour of Satyam. However, in the longer term the ratio is beneficial to Tech Mahindra. This merger will have potential for a decent re-rating,” said Mr Shrikant Shetty, Equity Research and Technical Analyst at Unicon Financial Intermediaries.
“However, the concern will remain how the British Telecom business will be affected and what will happen to the entity if British Telecom looks at selling out,” he said.
Ms Shanu Goel, Senior Research Analyst, Bonanza Portfolio, said, “The markets have reacted better than expectations. There has been substantial buying in both the stocks. Tech Mahindra shareholders will seek to benefit from the merger.”
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