Tech Mahindra, Mahindra Satyam get court nod for merger - Angel Broking

The Andhra Pradesh High Court on Tuesday cleared the decks for the merger of Tech Mahindra and Mahindra Satyam - which will create the fifth largest Indian information technology firm - after it dismissed petitions against the move. In total, justice NRL Nageswara Rao dismissed petitions filed by 35 entities, including those from family members of Satyam's founder Ramalinga Raju, two entities owned by engineering and construction firm IL&FS and minority shareholders who had opposed the merger. However, the court said all investigations into the accounting fraud at Satyam would continue. Mahindra Satyam and Tech Mahindra had obtained the approvals of most of the stakeholders a year ago, including the stock exchanges, Competition Commission of India and Mumbai High Court, but the merger could not be completed without the AP High Court's approval which the company has got now. The boards of both the companies had already proposed a swap ratio of 2:17 (for every 17 shares held in Mahindra Satyam, shareholders will get two shares in Tech Mahindra).

The merger will result in the creation of a new offshore services leader with revenues of ~US$2.5bn in revenues, approximately 80,000+ strong work force and 350+ active clients (including Fortune Global 500 companies), across 54 countries. This will enable Tech Mahindra to compete with biggies of the industry and vie for larger deals, which could lead to improved traction for the merged entity, acting as a catalyst for topline growth. The combined entity will have a broader service offering. As of now, Tech Mahindra's entire revenue comes from the telecom vertical, which has been shrinking over the past couple of years. After the merger, contribution from telecom would come down to sub-50% (47-48%).

The combined entity will have a broad based play across industries such as manufacturing, BFSI, telecom, technology, media and entertainment (TME), retail, transport and logistics and lifesciences and healthcare. We continue to remain positive on Tech Mahindra with a target price of Rs. 1,170.

Source : Equity Bulls

Keywords