Tech Mahindra Invests $422 Million For 51% Stake In Satyam

Posted Apr 15, 2009

Satyam Computer Services Ltd. was one of India’s top IT companies before their Chairman and founder B. Ramalinga Raju falsified the financial position.  Satyam exaggerated their cash position by as much as $1 billion by inflating the company’s quarterly earnings.  Satyam also lied about the employee count and other general information.  The controversy compared Satyam to former American energy company Enron.  Satyam became to be known as “India’s Enron.”

Since then India has been trying to figure out what to do with Satyam.  It already has a strong market share in IT, but now its reputation is tainted.  At one point it was rumored that IBM was interested in buying them out wholly, but those talks fizzled.  Now Satyam has been thrown a life line by Tech Mahindra, a telecom outsourcing company.

“We will work with Satyam’s customers, business partners, employees, and other stakeholders to restore confidence in the company and to create a platform for future growth,” stated Tech Mahindra CEO Vineet Nayyar.  Tech Mahindra has invested $422 million to buy-out 51% control of Satyam.  The deal still has to be authorized due to certain subject conditions.

Last week Raju and several of his accomplices have been charged with several crimes including conspiracy, forgery, falsification of records, evidence tampering, etc.  Others that were charged include Rama Raju, Vadlamani Srinivas, G. Ramakrishna, D. Venkapathy, Ch. Srisailam, Suryanarayana Raju.  Two others that were charged are employees of Pricewaterhouse Coopers India.

Since the controversy began, the United Nations and SanDisk decided to pull out of conducting any sort of business with Satyam.  In order to invest in Satyam, Tech Mahindra had to raised $55 million through short-term debt.  The Satyam may be given a new name and CEO as a result.