Analysts gave thumps up to the USD 1.8 billion merger deal involving Tech Mahindra and Mahindra Satyam which will create India's fifth largest software firm with projected revenue of USD 2.4 billion. The merged entity's combined size is expected to enable it a better chance of getting bigger and better clients,a stock market analyst said today. "The combined entity would have a market cap to the tune of about Rs 17,000 crore and make it the fifth largest infotech company in terms of market capitalisation. With this,it stands a good chance of getting bigger business,bigger projects and bigger clients. Further,it can cater to more project verticals," SMC Global Securities Strategist & Research Head Jagannadham Thunuguntla said. However,he said it will take considerable effort and time for the new entity to reach the league of Infosys or TCS. "Though Tech Mahindra's stake in Mahindra Satyam is presently to the extent of 42.7 per cent,it will be interesting to observe what will be the treatment for this cross holding," he said. He said one way of handling this is to create a trust to hold these cross holding shares called 'treasury shares'. "If they follow this route,then the value of these 'treasury shares' comes to about Rs 4,132 crore,and they can issue these shares in the future whenever they need funds." Incidentally,this is the route that has been followed and acquisition of other companies or inorganic growth can be expected. "British Telecom,a promoter of Tech Mahindra,will closely watch this space as they hold about 23.20 per stake in it. As the swap ratio is 8.5:1,British Telecom will hold about 11.11 per cent stake in the combined entity," he said. Overall,Thunuguntla said,it is a merger which may prove to be a win-win for all the parties involved,as this enables Mahindra Group to consolidate their infotech assets under one roof.
