Court green signal

Mumbai, June 11: The decks have finally been cleared for the long-awaited merger of Mahindra Satyam (earlier Satyam Computer Services) with Tech Mahindra after the Andhra Pradesh high court approved the plan today.

The merger of the two software entities will create the country’s fifth largest IT services firm, coming in the pecking order after Tata Consultancy Services, Infosys, Wipro and HCL Technologies.

The combined entity will have an employee base of 80,000 and a turnover of $2.4 billion.

Although Cognizant is the second largest IT services company from India, it is not listed on the domestic bourses.

At the hearing today, Justice N.R.L. Nageswara Rao dismissed a batch of petitions seeking to stall the merger and said the investigations into the fraud committed by Satyam Computer’s former chairman B. Ramalinga Raju and others would continue.

Sources here added that one of the conditions laid down by the high court was that the management of the merged company should co-operate with various agencies with regard to the ongoing investigations into Satyam’s affairs.

Last September, the Bombay high court approved the merger scheme subject to approval of the Andhra Pradesh high court. The amalgamation has also won approvals from the stock exchanges and the Competition Commission of India.

A swap ratio of 2:17 has already been proposed for the merger. This means that for every 17 shares held in Mahindra Satyam, shareholders will get 2 shares of Tech Mahindra.

Sources said both the firms would now take next steps to complete the merger that was expected in about two months.

On the stock exchanges, the share prices of the two entities rallied on a day the benchmark index Sensex sank by around 300 points. While the Mahindra Satyam share gained over 4 per cent to close at Rs 111.05, the Tech Mahindra scrip rose nearly 3 per cent to end at Rs 968.20.

Analysts say that following the merger, telecom will emerge as the biggest vertical for the merged entity and this will be followed by other verticals such as manufacturing and banking, financial services and insurance (BFSI). It is also expected to bring about synergies with fewer overlaps as Tech Mahindra is strong in telecom, while Mahindra Satyam is present in all the other verticals.

The two companies had started working towards integration of their operations ahead of their legal merger. For instance, they had formed common teams for marketing and participating in various projects.