Tech Mahindra merger with Satyam next year

The Mahindra group is likely to merge Tech Mahindra and Mahindra Satyam (formerly Satyam Computer Services) after June next year to transform the combined entity into an Indian information and communication technology powerhouse, Mahindra Satyam's chief executive officer C P Gurnani said yesterday.

''The merger of Satyam and Tech Mahindra can happen after Satyam's accounts are re-stated. The Company Law Board has given us time till 30 June next year to complete the restatement of accounts. Both companies have a lot of synergy and the combined entity will fuel business growth,'' Gurnani told newspersons in Hyderabad.

Mahindra Satyam's operating margins are on the rise as cost-cutting measures are starting to bear fruit. ''We cut costs by rationalising workforce and saving on-lease rentals on commercial space,'' he said. The actual operating margin was barely 3 per cent when Satyam's defamed founder B Ramalinga Raju confessed to perpetrating a massive corporate fraud in January this year.

The Hyderabad-based outsourcer is preparing ground for the merger and will market itself as an information technology and communications (ICT) firm to focus on Tech Mahindra's skills in the communication sector. ''The idea came from a 'shadow board' consisting of the brightest young minds, formed to serve as a wellspring of new ideas as we look towards re-vitalising the company,'' said Gurnani.

Tech Mahindra acquired Satyam in April this year. After the acquisition, Vineet Nayyar, the executive vice-chairman of the Mahindra Group, had confirmed the intention to merge the two companies but did not indicate a timeline, which could now be mid-2010.

Global audit firm KPMG is re-stating Satyam's past accounts to reflect the true financial health of the firm. Once this is done, boards of both the companies will have to give their consent to the merger, said Gurnani.