The combined entity of Tech Mahindra and Mahindra Satyam that with revenues of $2.4 billion will be headquartered in Mumbai, with CP Gurnani, the current whole-time Director and CEO of Mahindra Satyam, as its Chief Executive Officer.
“I have not been able to see any other candidate than CP Gurnani to head the company so far,” said Vineet Nayyar, Vice Chairman and Managing Director of Tech Mahindra and Chairman of Mahindra Satyam at the press conference to announce the merger details of the company.
The management also acknowledged that there will be some rearrangement of roles within the merged entity. “There will be some changes. As far as sales and delivery are concerned there is zero overlap so in that segment there will be no change. But in areas like HR, legal, Finance and resource management there will be some structural alignment,” said CP Gurnani, whole-time Director and CEO of Mahindra Satyam.
The name of the merged entity is yet to be announced. Senior management said that they will be embarking on project with marketing and brand consultants for the new identity of the combined entity.
The combined entity will have headcount of over 75,000 with 350 clients across 54 countries. The merger according to the management will take atleast eight to nine months to complete. Since all assets and liabilities will be transferred to Tech Mahindra post the merger, the entity will have cash surplus of Rs 1,800 crore.
Post the announcement the management will also hit the road to take the merger story to investors and customers. “We will have two groups headed by Vineet and me. And over the next 3-6 months we would be holding roadshows for investors and customers.” added Gurnani.
| Revenue contribution post merger | Sharholding: |
| Telecom: 47% | Mahindra & Mahindra: 26.3% |
| Manufacturing: 17% | BT : 12.8% |
| Technology, media & entertainment: 10% | Trust: 10.4% (treasury share) |
| BFSI: 11% | Mahindra Satyam public Shareholders: 34.4% |
| Retail: 5% | Tech Mahindra public shareholders: 16.1% |
| Others: 7% |
According to the merger scheme approved by both the Boards, the merger is proposed to be undertaken through a Court approved Scheme of Arrangement under Sections 391 to 394 of the Companies Act, 1956. The proposed Scheme of Arrangement will be subject to the approvals of the Bombay High Court at Mumbai and the Andhra Pradesh High Court at Hyderabad. The merger will further be subject to various statutory approvals, including those from the shareholders and the lenders / creditors.
The combination will benefit from operational synergies, economies of scale, sourcing benefits, and standardisation of business processes. This also will bring down the holding of BT in Tech Mahindra as well as in term of revenue.
Post the merger, BT’s stake in the merged entity will come down to 12.8% and its revenue contribution will also come down to 18-19% from the current 35% in Tech Mahindra.
Tech Mahindra that focuses only on the telecom segment for services will get presence in verticals like manufacturing, media & entertainment, BFSI, retail and other after the merger. This will also give the combined entity a diversified and well-balanced global footprint that would boast contribution from Americas at 42%, Europe at 35% and Emerging Markets at 23%.