Tuesday, April 14, 2009

Tech Mahindra says Satyam poses challenges

Tech Mahindra, which Monday agreed to acquire a controlling stake in Satyam Computer Services, admitted the crisis-ridden IT firm's liabilities would add to the challenges usually associated with an acquisition.

"We have taken on a challenge and we will make it work," Mahindra and Mahindra group vice-chairman and managing director Anand Mahindra told reporters after being selected as the highest bidder for the Hyderabad-based IT firm.

Mahindra said merger and acquisition decisions were taken in the best interest of shareholders. "We will try to make it as less painful as possible," he added.

Tech Mahindra vice chairman, managing director and chief executive Vineet Nayyar also admitted that the ride was not going to be smooth.

"Satyam's revenues have dipped from $1.8 billion to $1.5 billion and may come down to $1.3 billion in the next quarter," Nayyar said.

"Liabilities are there in terms of Upaid and the class action suits," he said, referring to the UK-based mobile payment operator that filed a case accusing Satyam of forgery.

"We had, however, made a fair assessment of what these liabilities would translate into. Let's hope we were right," Nayyar added.

Satyam faces the threat of paying up to $1 billion as damages to Upaid. Apart from this, a dozen-odd class action suits have been filed against it in the US.

But Kiran Karnik, chairman of Satyam's reconstituted board, is optimistic.

"Satyam is a fundamentally sound company with an impressive client roster and committed employees," Karnik said at a separate media briefing.

Satyam's reconstituted board has gone all out to get some clarity on its books of accounts, which were cooked by co-founder B. Ramalinga Raju over several years.

According to a company statement, Satyam's revenue stands at Rs.650 crore per month, while its operating profit is between Rs.15-20 crore per month.

The Hyderabad-based major also has immovable assets in terms of 450 acres of land, of which 125 acres are in Hyderabad alone that house its campuses.

The total valuation of the 125 acres is around Rs.1,700 crore.

"We are trying to get the accounts restated for the past five years starting from last quarter of 2008-09. It will take a few more months," added Deepak Parekh, HDFC chairman and a Satyam board member.

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