The year 2009 for Satyam Computer Technologies Ltd had been full of troubles and up downs. Satyam was plunged into a crisis in January after its founder, B. Ramalinga Raju, said that the company's profits had been overstated for several years. Finance professionals, however, say that the scam could not have happened without the complicity of company auditors.
After the scam in Maytas acquisition deal, Upaid Systems case, World Bank had banned Satyam from doing business with it for 8 years due to inappropriate payments to the World Bank's staff and the free fall of its share prices, the company could not stand on its own and hence SEBI permits for soliciting bids from potential buyers.
Good Old Time
The word satyam means "truth" in Sanskrit.
Satyam's network covers 67 countries across six continents, employs more than 40,000 IT professionals across development to serves over 654 global companies, 185 of which are Fortune 500 corporations.
In 2008, the company get Asian MAKE (Most Admired Knowledge Enterprise) Award from Teleos, in association with KNOW Network, UK Trade & Investment India (UKTI) Business Award for corporate social responsibility from UKTI beside many other awards since its formation. Ramalinga Raju, the chairman named as Ernst & Young Entrepreneur of the year.
But after four months of this pull-push, on April 13, 2009, Kiran Karnik, the MD at Satyam announced that IT services provider Tech Mahindra had offered the highest bid at Rs 58 per share and become the new owner of the company.
Tech Mahindra: Overview
With more than 25000 employees, Tech Mahindra Ltd formerly known as Mahindra British Telecom (MBT) is an Indian Information Technology service provider headquarters at Pune, India. It is the 6th largest software exporter in India (Nasscom, 2007) and 2nd largest Telecom Software Provider in India (Voice & Data, 2007) and JV between Mahindra & Mahindra Limited (M&M) and British Telecommunications plc (BT).
Satyam-Tech Mahindra deal
Tech Mahindra's acquisition of Satyam has come as a relief to both the market as well as most Satyam employees. Though worst may be over for Satyam, the deal is not going to be an easy ride for the Mahindra group company.
Challenges for Tech Mahindra
1. The biggest challenges for the new management will be to regain customer confidence so that they do not pull back the existing contracts.
2. Tech Mahindra has not much experience in most of Satyam's business verticals and may face problems while dealing issues relating to its own core business.
3. The new company has to pursue all the legal liabilities of the Satyam group.
4. Forming a new leadership team and the role of existing top management in the team will be a key challenge as they have to shortlist the existing key leaders.
5. The business profiles of both the companies are totally different and therefore Tech Mahindra has to face challenge of marrying the work cultures, winning the trust of the employees of two organisations and other human resource-related issues.
6. The Tech Mahindra management would have to clean the balance sheet of the scam-tainted company and show the real profits/loses by the company.
7. As Satyam already facing financial problems so Tech Mahindra has to deal with the Liquidity issue for its operations. It is assumed that the company may have to immediately invest Rs 1,000 crore in Satyam for operating expenses.
8. Last but not the least, in the tough time of recession every step from the new owner matter the most. The internal problems in its own company, like the company could not clinch a single deal in March and shed about 250 employees in the past three months citing reasons of non-performance, forces to take every step only after many evaluations.
The Satyam deal would bring Tech Mahindra into new industries, from manufacturing to financial services, and make the company India's fourth-largest outsourcing firm, by employee count, behind Tata Consultancy Services, Wipro Technologies and Infosys Technologies. Hence the deal may help the employees, shareholders and their clients to rejuvenate the lost glory of Satyam Computers.