Mahindra Takes Over Satyam

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Year 2009 saw the end of one of the biggest controversies in the IT and business sectors in India. Tech Mahindra, the IT arm of Mahindra Group, took over the scam-hit Satyam Computer Services to end the month's long controversies and uncertainties associated with the Hyderabad-based Indian IT giant.

Tech Mahindra, through its special purpose acquisition vehicle ‘Venturbay Consultants’, placed the winning bid of ` 58 per share. It is one-tenth of the share price that Satyam had traded just a year back. It had to spend a total amount of ` 1,756 crore to acquire Satyam's 31 per cent stake. An open offer came subsequently with the same bid price, where Tech Mahindra needed to pay ` 2,889 crore for 51 per cent stake.

It can be recalled here that the massive accounting scandal of Satyam, that shook not only the whole country but the whole world, came into limelight in January this year. In December 2008, Satyam went in to acquire the family-controlled business (Maytas Infrastructure and Maytas Properties) of its founder Ramalinga Raju. Despite the objections of its independent board directors, Raju went ahead to seal the deal for $1.6 billion. It compelled the government to review the deal. As the market panicked, the share price of Satyam plumbed down from ` 190 to ` 169.40 immediately. In January, Raju confessed the huge accounting fraud, which led to the arrest of himself and his brother B. Rama Raju and the former CFO Vadlamani Srinivas. Government also dissolved the entire board of Satyam.

The incident trembled the whole world; tension, controversies and uncertainties started mounting up. On one hand, the employees of the organizations fell into deep water, while on the other hand, the clients got anxious over the fate of the projects.

The Satyam scam opened up several other scams and issues. The auditors of PriceWaterhouseCoopers were arrested for their alleged involvement in the scandal. Independent board was appointed to run the company, which later announced that it'd sell the company. Avendus and Goldman Sachs were hired. On April 9, 2009 the Satyam board announced bidding for sale. Along with others, Mahindra placed its bid on April 13, 2009. Surpassing the bids of the second highest bidder Larsen & Toubro (` 45.90 per share) and the third highest bidder WL Ross & Co. (` 20 per share), Tech Mahindra won the bidding process to take over Satyam and put an end to one of the biggest frauds in the Indian IT industry.