Back in 1986, Keshub Mahindra,
the iconic Chairman of
Mahindra & Mahindra Group, had tied up with British Telecom to
enter into telephony business in India. But at that time, the prevailing
government had turned their telecom business plan down. The unfazed businessman
then had switched his business plan and decided to enter into IT outsourcing
under the banner Mahindra British Telecom (now Tech Mahindra), though heavily
depending on the telecom contracts from its UK partner, British Telecom
(BT). Twenty-three years on, Tech Mahindra is now the country's fourth-largest
IT company after acquiring the scam-hit Satyam Computer Services.
By acquiring a company larger than its size, and that too a fraud-hit
one, Tech Mahindra has shown to the world its oozing confidence that it can make
a turnaround even to a scam-tainted company. The deal costs Tech Mahindra
a whopping Rs 2,889 cr to acquire a controlling stake (51%) in the
beleaguered Satyam, and it values each share of Satyam at Rs 58, a premium of
23% over its closing price. The deal has moved Tech Mahindra up the
value chain and is accretive to it from the geographical and business portfolio
perspectives and the size of the scale of operations. But from valuations and
the operating synergies perspective, the deal seems to be a dud.
Furthermore, upheaval tasks lie ahead of Tech Mahindra to orchestrate a
turnaround. There remain challenges in terms of generating confidence among the
customers and employees for Tech Mahindra and to reduce attrition of
clients to a bare minimum. In addition to that, there are uncertainties which
will be there for a while with respect to restatement of accounts, lawsuits and
financial liabilities. The task is cut out for Tech Mahindra to help
Satyam make a turnaround. And given its integrity, legitimacy as well as
resources—human resources-wise, management-wise as well as finance-wise—and
with Anand Mahindra at the helm of affairs, it is expected by many that
Tech Mahindra will be able to get Satyam back on track.
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