Hyderabad: The Andhra Pradesh High Court on Tuesday approved the merger of Mahindra Satyam (MSat) with Tech Mahindra while dismissing the petitions of some shareholders seeking to stall the proposal in its current form so as to safeguard their financial interest.
The Court said, however, that the investigations into the alleged fraud committed by Satyam Computer's former Chairman B Ramalinga Raju and others would continue.
Following the financial fraud by Raju, Satyam was taken over by Mahindras, who now plan to merge MSat with Tech Mahindra - a move opposed by some stakeholders.
"CP 123 (the merger petition) is allowed. Investigations will continue until they are disposed of," Justice N R L Nageswara Rao said while dismissing other petitions seeking to stall the merger.
The merger when completed will lead to creation of the country's fifth largest software services firm.
MSat CEO C P Gurnani said it will take another 2-4 weeks to get technical clearances and form the single entity.
"There are some formalities with registrar of companies in different states where we are registered. We expect it will take 2 to 4 weeks to compete all the issues," Gurnani said.
"The companies which are running virtually as one, will become a USD 5 billion (entity) by December 2015," Gurnani who is set take charge as CEO of the combined entity said, adding that they will be ready with new logo and design by then.
Replying to a query, he said there will not be any trimming of manpower after the merger.
Satyam Computer shares closed at Rs 111.05 apiece, up 4.17 percent on BSE.
The scheme of amalgamation has already been cleared by various institutions such as Competition Commission of India, BSE, National Stock Exchange and Bombay High Court.
Last year, Tech Mahindra and Mahindra Satyam announced their intention to merge aiming to create a USD 2.5 billion entity. The merger has been delayed by more than a year as some of the shareholders including a subsidiary of IL&FS approached the court against the merger proposal in its current form.
As many as 37 different firms claim that the city-based tech firm owes them huge sums which were given as loans when Raju was managing the company.
Some minority shareholders objected the merger claiming that the the swap ratio ?- two shares of Tech Mahindra for 17 shares of Satyam Computer -- is not appropriate. The said swap ratio was determined by the Boards of TechM and MSat.
Earlier, MSat Chairman Vineet Nayyar had said that the swap ratio was suggested by an international consulting firm and the Boards of both the companies felt that it was appropriate.
With regard to the reported loans given by the 37 firms, MSat had said it classified Rs 1,230 crore under suspense account as advised by some Government agencies.
"We are pleased with the decision of the court and our faith in the judiciary stands vindicated. The next step will be to formally conclude the integration process and accelerate our ambitious focus towards becoming a stronger force to reckon within the IT industry and delight our stakeholders," Tech Mahindra spokesperson said in a statement.
In January, 2009, Raju had admitted to fudging account books to the tune of thousands of crores of rupees. Tech Mahindra acquired Satyam in April, 2010 and later rebranded the company as Mahindra Satyam.
Among the three key large corporates promoted by the Raju family, Satyam Computer was acquired by Tech Mahindra, while Maytas Infra and Maytas Properties were bought by infrastructure firm IL&FS.
Mahindra Satyam and Tech Mahindra, along with their subsidiaries, employ about 85,000 employees with combined revenues of about USD 2.7 billion.
The combined entity would be country's fifth largest software services provider after TCS, Infosys, Wipro and HCL Technologies.
Though the companies have received court approval now, they had began working as one entity for over one year with joint go-to-market strategies.
The companies have appointed strategic business leaders, who have been mandated to take care of the two businesses.
Tech Mahindra has also been working on settling the legal claims made against Satyam after the scam was made public.
During its third quarter of 2012-13 fiscal, Mahindra Satyam paid Rs 294 crore towards settlement of legal claims of Aberdeen. It had agreed to pay USD 68 million to Aberdeen Global and 22 other funds to settle claims for alleged fraudulent misrepresentations.
"With the settlement of the Aberdeen suit, the external litigation issues now stand concluded, freeing us to focus even more on the business-ready solutions for our customers," Mahindra Satyam Chairman Vineet Nayyar had said.
First Published: Tuesday, June 11, 2013, 15:55