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Tech Mahindra wins Satyam bid

Samad Masood | April 17, 2009
Its not altogether surprising if youve never heard of Tech Mahindra outside of the UK and India.

Plenty of challenges ahead

Speculation abounds as to the state of Satyam and what Tech Mahindra will have to do to get the business back on track. But this is just speculation! While some preliminary audited financial metrics were shown to the Satyam bidders, concrete financials are yet to emerge.

It is simply far too early to estimate the corporate actions that Tech Mahindra may have to take. And while they may include redundancies, reorganisations, and disposals, its just as likely that these actions will not be necessary. After all, the low level of overlap between the two companies would suggest that Tech Mahindra would not need to cut back Satyams operations unless they were found to be unsustainable due to poor management and fraud previously.

Thats not mentioning the potential liabilities associated with Satyam, which could face class-action suits from both shareholders and former clients. Again, one can only speculate about the size of these liabilities and how long they will take to be settled. None of these challenges can be tackled properly until Tech Mahindra is able to get a trustworthy account of Satyams total business. We only hope for its sake that preparing these numbers doesnt take any longer.

On the positive side, Tech Mahindra can use this as an opportunity to rebrand and reposition itself as a broader tier-1 Indian services player. Indeed, this acquisition can be seen as a new start for both companies and if successful, the turnaround and integration story could help position Tech Mahindra as a prominent and trustworthy player.

Samad Masood is an analyst in Ovum's UK software and IT services practice, and specialises in IT services, outsourcing and offshore services.


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