Curtains to Satyam episode

With the announcement of the successful bidder for scam hit Satyam Computers the collective sigh of relief must have been felt all over the globe. Here was a major international outsourcer almost on the throes of being vaporized into thin air lock stock and barrel. And yet Monday the announcement came that indeed there was a taker for Satyam. This is flabbergasting for it really required nerves to take a call on Satyam. It was like taking a shot blindfolded. The extent of class action suits abroad, the absence of a dependable balance sheet on which to base decisions particularly in terms of unknown liabilities, the mood of the clients notably the large ones and the merit of the need for the buyer to get to the bottom are sufficient reasons to deter any prospective investor from putting money. And in the beginning it looked as if the company was destined to go down under. That this did not happen speaks volumes of our ability to deal with a crisis. Prompt, decisive and purposeful actions by all concerned viz the Govt , the company law board and regulatory institutions not only helped bring about a quick solution but also did not leave any scope for criticism.

Not to be left behind is our entrepreneurship . It is said fortune favours the brave. Tech Mahindra , the successful bidder has been brave in putting its sight on Satyam. And who knows Satyam may turn out to be a fortune for Tech Mahindra. The benefits are immense. In one go Tech Mahindra has positioned itself into the major league along with the Infosyses and TCSs of the world. Instead of remaining confined to only telecom (BT which accounts for bulk of its buisiness) it now has other verticals such as financial services, manufacturing , healthcare and others. Tech Mahindra's client base has now taken a quantum leap and it can boast of such names as GE, Cisco, GM and Citi . And of course it now has nearly 48000 additional talent to tap into.

Will Tech Mahindra be able to put Satyam back on track or even increase its revenue and most importantly expand the margins. It should be possible. Mahindras are a successful business group with proven track record. Tech Mahindra's top management has talent required to build businesses . Besides the much talked about 3% margin might turn out to be not so big a dampener. Most software export companies have an operating profit margin of anything around 25-30 %. Therefore when Satyam gets back on cruise mode again after everything has been set in order it should be able to generate the prevalent margins. And this will be the bonanza that Tech Mahendra can strive for.

There is no doubt that the present valuation of Satyam is the result of the sad state of affairs that it had to go through in the past. And now that there is a new beginning and as someone said "A new star is born " fortune may indeed favour Tech Mahindra since the price it has paid at Rs 58 a share might turn out to be a fantastic bargain.