Satyam, Tech Mahindra starts integration process

Mahindra Satyam and Tech Mahindra have started defacto integration process and are only waiting for the legal assent for formal merger, Mahindra Satyam chairman, Vineet Nayar said on Thursday, adding that the process of merger was in the final stage and it would soon get the court's nod.

"I am confident that this matter will be closed soon and we will operate as a combined company in the near future. In fact, defacto we are already doing it and what we are looking for is a legal assent," he said while announcing company's third quarter results.

The merger was proposed soon after Anand Mahindra-owned Tech Mahindra purchased Satyam Computer Service Limited in 2009 and re-branded as Mahindra Satyam.

The government auctioned the Hyderabad-based IT services firm Satyam after its founder and chairman B Ramalinga Raju admitted India's biggest accounting fraud. However, the merger was put on hold in view of the investigations into Satyam fraud by various agencies.

Mahindra Satyam CEO C P Gurnani said telecom would be the biggest vertical for the combined entity followed by manufacturing and BFSI (Banking, Financial Services and Insurance). He said within manufacturing aerospace and defence would play dominant role because of the synergies of Mahindras with companies like Mahindra Defence Systems and Mahindra Aerospace.

Mr Nayar said they would be using the synergies of both the companies while ensuring that there was no duplication. While Tech Mahindra is strong in telecom, Satyam has its presence in all other verticals.

He believes services would be the only area where there could be some overlap. On branding the new entity, Mr Gurnani said this was put to vote among clients, customers and analyst community and they were waiting for the result.

Mahindra Satyam, which is sitting on huge cash reserves of Rs 3,311 crore, is also looking for strategic acquisitions. Mr Gurnani said there would acquisitions would be in Europe and Australia as there were more opportunities there. He also indicated that the acquisitions would be in engineering services and that size was not an issue for them.

He also pointed out that company's non-America revenue came down during the third quarter which ended in December 2012. He attributed this to some large technology customers in US deciding to take a holiday during the period.

Currently America accounts for 53 per cent of the revenue, Europe 24 and emerging markets 24 per cent. He believes this trend would continue for sometime. Manufacturing contributed 34 per cent to the revenues in Q3 while BFSI accounted for 20 per cent revenues.

Mr Nayar also said the current projections indicate some positive signs in the global economy but full recovery would be a long and slow process. "Our expectations are customers would invest more in technology and IT this year compared to last year," he added.