Comments
The boards of Tech Mahindra and Mahindra Satyam will meet on Wednesday to consider the widely-anticipated merger of the two companies.
They will also discuss the amalgamation of their wholly-owned subsidiaries. The subsidiaries are Venturbay Consultants Private Ltd, C&S System Technologies Private Ltd, CanvasM Technologies Ltd and Mahindra Logisoft Business Solutions Ltd.
This merger will be done to “consolidate the information technology / software and related businesses and to form a single entity providing services in this sector,” said separate statements from the companies.
The stock of Tech Mahindra closed at Rs 648.25, up 5.13 per cent and Satyam Computer Services closed at Rs 74.15, up 4.66 per cent from the previous close on the BSE.
The markets are keenly waiting for the merger (and the swap ratio) of the two companies. The swap ratio can be based on the market price, net worth, Earnings Per Share (EPS) etc.
Predicting the swap ratio of the merger, a report from SMC Global Securities said “on the basis of the current market prices where the shares of Mahindra Satyam and Tech Mahindra are trading, the likely swap ratio is appearing to be close to 9:1. That is, 1 share of Tech Mahindra will be issued for every 9 shares of Mahindra Satyam.”
If the final swap ratio is close to 9:1, the combined entity's market cap will be to the tune of about Rs 17,000 crore.
To become
5th largest firm
Post-merger, the combined entity will become the country's fifth largest IT company, after TCS, Infosys, Cognizant and Wipro.
After the massive fraud at Satyam Computers, the new management had decided to withdraw the American Depository Shares (ADS) as it was unable to meet the strict SEC regulations. Incidentally, the deadline for cancellation of ADS was March 16. The process of converting the ADS into their underlying shares in India will be completed in a week.
Another challenge ahead of the merged entity would be how it would take care of the legal issues confronting it. The first pertains to income-tax of Rs 617 crore between 2001 and 2008, which is in courts and the second is the claims of Raju's companies on Satyam for Rs 1,200 crore.
They can definitely cast a shadow on Satyam's valuation. The two firms have appointed J P Morgan and Morgan Stanley to independently evaluate the value.
Satyam's investors have been opposing a merger now as they fear lower valuation.
A company executive said Mahindra Satyam might prefer shifting the combined entity's headquarters to Pune.
The merger process will take nine months to complete after meeting statutory and legal requirements.
Comments
COMMENT NOW
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.