AT&T sells entire TechM stake for Rs 600 crore profit

MUMBAI: US telecom provider AT&T has sold its entire 8.07% stake in software services provider Tech Mahindra a month after acquiring it from the promoters. The telecom major sold 7% stake in Tech Mahindra on Wednesday and another 1% over the past few weeks in the market, thus making an exit from its stake in the software firm completely.

The 7% stake was sold at Rs 762.4 a share, giving AT&T Rs 660 crore and netting it a profit of around Rs 500 crore in a month's time. If AT&T's entire 8% stake in Tech Mahindra is considered, the telecom major's profit could be nearly Rs 600 crore.

A bulk of the shares were purchased by LIC, according to market sources. There was no official confirmation from Tech Mahindra on this. LIC already holds around 7.4% in Tech Mahindra, and the current transaction could take its stake up to 12-14%.

Citigroup was advisor to AT&T in the transaction. AT&T had bought the stake in March 2010 by exercising an option it had to purchase the shares at $3.5 a share or around Rs 162 a share. AT&T acquired the right to exercise the options because it fulfilled certain revenue targets in terms of outsourcing contracts to Tech Mahindra.

AT&T is also Tech Mahindra's second-largest customer, contributing around 15% of its revenues, said analysts. After British Telecom (BT), which is a significant stakeholder, it contributes maximum revenue to Tech Mahindra. However, speaking to ET NOW - this newspaper's business channel, the Tech Mahindra management said the stake sale would not have any implications on business to Tech Mahindra from AT&T.

"The holding of equity and operational decisions are two distinct functions in AT&T. These are two unrelated issues and I don't see any impact of one on the other. Given the current momentum, and the kind of opportunities we are participating in, I think, we would be growing the business, rather than it being reduced or adversely impacted in any fashion," Tech Mahindra vice-chairman Vineet Nayyar said.

Analysts that ET spoke to also expressed similar views. "I am not overly worried about the business impact. The primary concern on the business front for Tech Mahindra is still BT," said an IT analyst with a brokerage firm. Tech Mahindra shares slumped 4.3% on BSE on Wednesday to Rs 770.