Tech Mahindra Ltd. - Zen Money

Company Profile: Tech Mahindra Limited (TechM) is the information technology arm of the Mahindra Group and serves telecommunication service providers, equipment manufacturers, software vendors and systems integrators across the globe, with BT Group Plc as its biggest client. In the year 2009 TechM acquired the leading IT services company, Satyam Computers. In March 2012, the merger between TechM and Mahindra Satyam was announced giving shareholders one Tech Mahindra stock for every 8.5 shares of Mahindra Satyam The combined entity would have revenue in excess of US$ 2.4 billion, employee strength of more than 75,000 and a client base of over 350. The merger complements the skill set, geographical revenue stream, with minimal overlap of services and offerings from both the entities. TechM has acquired three companies in the last few months; Sweden-based Type Approval Lab, telecom BPO player Hutchison Global Services (HGS) in Sep'12 and 51% stake in Bharti Enterprises promoted Comviva Technologies.

Strengths:

- The combined entity is expected to benefit from the synergies of expertise in various verticals and large talent pool. There can also be a improvement in operational efficiencies.

- Tech Mahindra is well positioned to cash in on the opportunities ahead of the launch of 4G & LTE based services by service providers due to increased popularity of gadgets like smart phones, tablets etc

- Satyam's expertise in domains like enterprise solutions, CRM, business intelligence, engineering solutions, and infrastructure management services, could position the combined entity on par with the front line IT companies in winning the IT projects.

Concerns:

- Any delay in merger process due to litigations could be a concern in the short term.

- Any prolonged uncertainty in the global economy could lead to postponement of client IT spends, and thus affect volume growth.

- Currency volatility is a key factor that could impact the bottom-line on either side in the medium term.

Outlook: Tech Mahindra is expected to perform well in the next few years due to the possible synergies from the merger with Mahindra Satyam (which has been postponed till Sep'13).The combined entity with it's diverse IT services offerings, backed by strong management could provide value for the investors on par with it's front line peers in the long term. Further, TechM's recent acquisitions (HGS, Comviva and Type Approval) will enhance its revenue stream in the coming quarters.

Source : Equity Bulls

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