The Hindu Business Line : Industry lauds swift action

Bangalore, April 13 Besides providing a sense of relief to the Indian IT industry, the successful bidding process for the beleaguered Satyam has sent a strong signal reassuring investors and clients worldwide.

Tech Mahindra emerged as the highest bidder for Satyam on Monday. The acquisition of a controlling stake in Satyam would place the telecom services vendor in the league of the top five IT services companies.

The image of the Indian IT industry had taken a beating after the scam perpetrated by Satyam founder Ramalinga Raju surfaced early this year.

“It is a great sense of relief and Satyam will come back on track,” said Mr Ganesh Natarajan, CEO of Zensar Technologies. Commenting on the price bid, Mr Natarajan said, “it is a very good valuation and even I would have liked to buy it. The Mahindras have taken a risk but they will surely be rewarded”.

The industry is also happy over the speed at which the issue has been resolved. “It is commendable that the government-appointed board at Satyam has been able to bring a closure to the uncertainty surrounding Satyam’s future,” said Mr S. Gopalakrishnan, CEO and MD of Infosys Technologies. “The Government has addressed the issue quickly and responsibly. Overall, it is a good thing that the issue is put behind us,” he added.

Quick conclusion

Stating that the manner in which the crisis has been dealt would boost the investor and customer confidence, Mr Rostow Ravanan, CFO, MindTree, said, “The investors will know that if a fraud is committed in an Indian company, the authorities will act swiftly and come to a quick conclusion”.

However, analyst Mr Harit Shah of Angel Broking said the pending law suits and the restatements of the accounts are a bit of concern as these things are yet to be sorted out. “The damage done for the industry has now been restored,” he added.

“As far as challenges are concerned it will be integration of front-end operations, skill sets, etc, but one big factor that is in their favour is that the Satyam staff support the deal. That is important in any integration. I am confident that Tech Mahindra will plan the acquisition methodically,” Genpact CEO and Nasscom chairman, Mr Pramod Bhasin, said.

Mr Diptarup Chakraborti, principal research analyst, Gartner, said retention of Satyam clients and employees will be the biggest challenge that Tech Mahindra will face and the company would need to remodel its sales and marketing model.

Congratulating the Satyam board for closing the transaction in a fair, transparent and speedy manner, Mr Suresh Senapaty, ED and CFO of Wipro said, “This also demonstrates the strength of Indian corporate culture.” Mr S. Ramadorai, CEO, TCS, said, “The new owners and management team will bring confidence to all stakeholders, including customers and the employees of Satyam, and that is what was required in the current situation.”

“The Rs 1,700-crore inflow would ease the liquidity crunch in Satyam,” said an analyst at Kotak Securities adding “there needs to be further clarity on how Tech Mahindra will finance the acquisition”.

Mr Chandramouli, Director (Advisory Services) at Zinnov Consulting said the leveraged buyout for Tech Mahindra will put pressure on its operations due to interest payments and borrowings. “Tech Mahindra will have to deal with not just internal challenges of integration but also external challenges which would necessitate new business models and flexibility. The new size of the organisation will reduce the organisational agility that Tech Mahindra had,” he said.