 "Satyam is dead, TechM set to emerge from its shadow")
Tech Mahindra on Tuesday said it had completed the merger of associate Satyam with itself to create the country's fifth-largest IT services company, with annual revenue of $2.7 billion, 84,000 employees and 540 customers in 46 countries.
Tech Mahindra had acquired Satyam as part of a government-sponsored bidding process in April 2009. This was after Satyam founder and then chairman B Ramalinga Raju confessed to a huge accounting fraud. Pending legal hurdles, the companies remained separate entities, even as they were operating as part of one group.
"Like any modern-day couple, we were living in for the past four years. We are married now," Vineet Nayyar, vice-chairman of the new entity, said with tongue firmly in his cheek. (SATYAM THEN, TECH MAHINDRA NOW)
Nayyar said: "All the excess weight has been removed. Now we need to add more bone and muscle to the company." He was referring to the four-year process to create synergies between the two companies.
Tech Mahindra had indicated several times that it would prefer to do away with the Satyam brand, which was restricting its ability to participate in large contracts because of the 'tainted' image.
"I think when a brand gets sullied, you can't wash it like a piece of cloth. You have to burn it and that's what has happened. This is what I will call an altogether shuddhikaran (purification) of Satyam," said Harish Bijoor, a brand and business strategy consultant and CEO of Harish Bijoor Consults.
According to C P Gurnani, the CEO & MD of the merged entity, the management decided not to give a new name to the entity on the basis of a 'majority view of employees, customers and analysts'.
The management maintains there will be no major change in operations, while it agrees the merger will have a positive rub-off. "The benefit will be in terms of perception. People will see us as a single strong entity now," Gurnani said, adding that the company had requested the Registrar of Companies to "scratch" out the name Satyam from its books. The company, however, said the Satyam brand, as well as the trademarks, would always remain with it.
Though the Tech Mahindra management refuses to publicly acknowledge, its officials privately reveal that there is an overhang of the fraud-hit Satyam on the group.
"There were many government deals, both national and international, where we could not participate because Satyam's accounting was seen as not being in order," said a company official. "Now, that window opens for us," he added.
According to Jaideep Mehta, country general manager of research and consultancy firm IDC India, the move will clearly remove the insecurity within the company on the future management structure and create strong integrated market strategy.
"Going away of the Satyam name means that the stigma, too, is gone. One should not forget that Mahindra is a strong brand with global appeal. So, it's a clear advantage in these turbulent times," Mehta said, adding that the company's strategy to focus on telecom and manufacturing should pay off in the long run.
After the merger, around half the company's revenues will come from the telecom vertical - as Tech Mahindra originally focused mainly on this one. The company has, since acquiring Satyam, been trying to diversify into other verticals using the latter's existing presence in those. Telecom would account for a high proportion (55 per cent) of the merged entity's revenue mix, while British Telecom's share in it would come down to 14 per cent.
Gartner Vice-President and distinguished analyst Partha Iyengar said the integration issue had been long-pending. "The Satyam brand had pretty much disappeared and got 'subsumed' into the Tech Mahindra brand by default."
He said though it was unlikely to cause much disruption in the market, Tech Mahindra had gone with low-risk, low-reward option with this branding approach.
"It has possibly lost an opportunity to generate some excitement around the merged entity by coming out with a totally new brand and launching it with a big bang," Iyengar added.
The company has also appointed Milind Kulkarni as the chief financial officer of the merged entity, replacing Sonjoy Anand, who decided to pursue international opportunities.
The boards of the two companies had approved the merger on March 21, 2012, but the formal amalgamation had to wait even after the Mumbai High Court approved it, as the Andhra Pradesh High Court's clearance came only on June 11.
On share-swap, Gurnani said that would take place on July 5l. Under it, 8.5 shares of Satyam would be given for every share of Tech Mahindra held. Shares of Tech Mahindra on Tuesday rose 1.02 per cent from their previous close to end the day at Rs 1,009.70 on BSE.
(With inputs from Bangalore and Hyderabad bureaus)