Mahindra Satyam shareholders approve merger with Tech Mahindra

N Shivapriya & Deepika Amirapu

MUMBAI/HYDERABAD: Shareholders of Satyam Computer and Tech Mahindra approved the merger of the two companies with over 99% majority at court convened meetings last week, paving the way for next step in the merger process and the creation of software exporter with around $ 2.5 billion in revenues.

Over 19 lakh retail shareholders of Satyam Computer voted against the merger but they were outnumbered by institutional shareholders who voted as one body in favour of the amalgamation of the two companies on Friday.

There were no dissenting votes among the institutional shareholders as in the promoter group. Close to 30 lakh retail shareholders also voted in favour of the merger.

"For a merger you need the consent of creditors and shareholders. The law states 75% of all shareholders that are present and voting should be in favour for it. This effectively means that minority shareholder may voice their opposition but if the mandatory threshold is met, the courts would generally approve the scheme (of merger)," Siddharth Shah, partner at law firm Nishith Desai Associates.

Many of Satyam's retail shareholders opposing the merger were hoping its stock price would appreciate, resulting in a better swap ratio and more shares in the merged entity. As it stands now Satyam shareholders will two shares of Tech Mahindra for every seventeen shares they hold.

Shares of Satyam, once ranked the country's fourth largest software exporter, dived to below Rs 40 from over Rs 150 - Rs 200 levels when its founder and former Ramalinga Raju confessed to inflating revenues and profits, and some shareholders were hopeful that the stock would cross Rs 100 again since it was on the mend under the new owners, the Mahindra group.

"The management did not pay heed to us even when we asked them to defer the merger. A year later, we could have got better valuations," said K Mishra, one of the retail shareholders. Since the Mahindra group took over the ownership of the scam-hit company, its share price has appreciated several times over since the crash reaching a 52-week high of Rs 94.

Another retail shareholder was more pragmatic. "We were hopeful of getting more shares in the merger. But we are happy that the management has treated us well, given all that happened to Satyam in the past," he said.

By merging Tech Mahindra and Satyam, the management hopes to cut costs in support functions and also benefit from economies of scale. The merger has been the stated intention since the time the Mahindra group won the bid to become the scam-hit firm's new owner and put its operations back on track.

On the day the merger was put to vote to Satyam shareholders, the Satyam stock slumped 1% to Rs 76.70, while that of Tech Mahindra was up 1% to Rs 675.65.