The Mahindra Group, with a net worth of US $ 6.3 billion is one of the top 10 industrial houses in India. It is a market leader in multi-utility vehicles in the Indian market and universe ‘s 2nd largest manufacturer of tractors. The Mahindra Group is now a innovator in the most of the cardinal sectors of the Indian economic system including the fiscal services, trade, retail and logistics, automotive constituents, IT and Infrastructure. It is besides the proud receiver of the Japan Quality Medal, the lone tractor company worldwide to be bestowed this award. It besides holds the differentiation of being the lone tractor company worldwide to win the Deming Prize. The US based Reputation Institute late ranked Mahindra among the top 10 Indian companies in its Global 200: The World ‘s Best Corporate Reputations list.
The Mahindra Group has many verticals of its concern runing from Automobiles to IT. Automobiles, Farm Equipment, Infrastructure and Real Estate, Engineering Services and IT are its chief verticals. The IT vertical of Mahindra ‘s concern is called Tech Mahindra.
Tech Mahindra has more than 25000 employees and was one time known as Mahindra British Telecom ( MBT ) . This was an Indian Information Technology service supplier with its central offices located in Pune, a metropolis in Maharashtra, West of India. It is graded 6th in India as the largest package exporter and ranked 2nd in the field of the largest Telecom Software Provider in India and is the Joint Venture between Mahindra and British Telecommunications. Tech Mahindra is a taking supplier of solutions and services to the telecommunications industry, with a bulk interest owned by Mahindra & A ; Mahindra Limited, in partnership with British Telecommunications plc. With entire grosss of Rs 44,647 million in the twelvemonth ended March 31, 2009, Tech Mahindra serves telecom service suppliers, equipment makers, package sellers and systems planimeters.
Satyam Computers: –[ 2 ]
Satyam is ranked 4th in the field of the largest package services exporter. It was founded in the twelvemonth 1987 by B Ramalinga Raju. Satyam Computers began with a mere 20 employees and captured a figure of IT undertakings from companies.
Satyam Computers is a taking planetary concern and information engineering Services Company, which delivers consulting, systems integrating, and outsourcing solutions to clients in legion industries across the Earth. Satyam leverages deep industry and functional expertness, taking engineering patterns, and an advanced, planetary bringing theoretical account to assist clients transform their highest-value concern procedures and better their concern public presentation. The company ‘s professionals excel in technology and merchandise development, supply concatenation direction, client relationship direction, concern procedure quality, concern intelligence, endeavor integrating, and substructure direction, among other cardinal capablenesss. Satyam besides caters other services such as Enterprise Integration and Infrastructure Management. It specializes in Sheet Metal Parts and Fabrication in the Fieldss of Automobiles and Electrical Industries. Satyam Computers besides has a strong presence in the Aerospace Industry. Satyam has assorted international and national clients such as General Electric, Nestle, Qantas Airways. It besides has a high degree of competition with houses like Tata Consultancy Services, Wipro and Infosys Technologies along with extremely rated international rivals like IBM and Accenture, in the field of outsourcing.
Part IV- RESEARCH FINDINGS
4.1: Background information of the cozenage: –
Though Mahindra Group has a strong clasp in the Automobile sector, they felt the demand to progress in the IT sector as Mahindra was a little participant in the IT sector. They realized that the fastest manner to turn in the IT sector was through Amalgamations and Acquisitions. In the twelvemonth 2007, Mahindra started reconnoitering for companies to get in the IT sector. In 2008, as a portion of their program, Mahindra sent antennas to Satyam Computers and offered Satyam an chance to unify with them.
This proposal was at the clip when B. Ramalinga Raju was still the Chairman and more significantly it was before the fraud was admitted. Though Raju wanted to unify with Tech Mahindra, he chose non to reply this proposal. Soon after this, Ramalinga Raju admitted to the fraud and Satyam was about driven to bankruptcy. Mahindra felt that this was the discovery they required in the IT sector and lunged at it.
4.2: The conditions taking to the cozenage, the grounds, and its wakes: –
It started with Satyam ‘s programs to purchase Maytas belongingss and Maytas Infrastructure Company for a proposed $ 1.6 billion. Satyam had planned to get about a 51 per cent interest in Maytas Infrastructure bing $ 300 million and a 100 per cent portion in Maytas Properties which would be them $ 1.3 billion. Satyam would purchase 31 per cent stakeA in Maytas Infra from boosters at Rs 475 per portion with an unfastened offer to public for 20 per cent interest at Rs 525 per portion.
It seemed that this trade would empty Satyam ‘s exchequer and would convey in debt along with adding about $ 1.48 billion to the boosters ‘ pool. This acquisition did non travel down good with the investors and this raised several intuitions about the trade. Soon after Ramalinga Raju announced that Satyam was traveling to get Maytas Infrastructure and Maytas Properties, he invited the wrath of the investors in a conference call. The stockholders were ferocious over the trade ; Furthermore, Satyam was criticized by the authorities over this acquisition. As a consequence, Satyam called of the trade to get Maytas. However, by so, the harm was done. What had shocked investors is that this will be funded out of hard currency militias and debt in 75:25 ratios. The large inquiry was why a portion barter option could n’t hold been considered alternatively of run outing Satyam Computer ‘s cashA militias.
4.3: Research findings about incidents which added to Satyam ‘s ethical wretchednesss: –[ 3 ]
One incident which proved dearly-won to Satyam was the prohibition of 8 old ages that it faced from the World Bank. It had come to this phase when Satyam was accused of corrupting and several other malpractices. This prohibition impacted Satyam Computers to a great extent since it was already happening it hard to non merely retain but besides attract clients in a planetary market which was infected with recession. This prohibition had been put away due to the grounds of “ improper benefits to bank staff ” and “ deficiency of certification on bills. ”
In 2005, when Satyam provided IT services to the World Bank, allegations of graft surfaced. In 2007, an internal World Bank probe found that former VP Mohamed Muhsin had secured contracts and purchase orders deserving $ 100 million for the Indian house in return for Satyam ‘s stock options at privileged monetary values. It was after this probe that he was banned from the World Bank. However, Satyam was allowed to supply services to the bank boulder clay 2008.
Furthermore, Satyam besides faces terrible allegations of transgressing the security at the World Bank. Many of the World Bank ‘s records have been illicitly accessed over the last twelvemonth by Satyam Computers. This raised greater inquiries over the ethical behaviour of Satyam.
Due to this, an probe was carried out into the accounting statements of Satyam and there were found to be big spreads in the balance sheet along with hyperbolic net income borders and others.
Ramalinga Raju so admitted to perpetrating a fraud of Rs.7000 crore and held himself accountable for the spreads in the balance sheet and other histories. On January 7, 2009, Ramalinga Raju wrote a confession missive to the board of managers every bit good as to the Chairman of SEBI sing the fraud that was committed by him. In the missive, he stated how he had tampered with the histories and the balance sheet by blow uping the net incomes and the bank and hard currency balances, by accruing non-existent involvements and by exaggerating debitors ‘ place.
The followers is an infusion from his missive of confession: –[ 4 ]
Dear Board Members,
It is with deep sorrow and enormous load that I am transporting on my scruples, that I would wish to convey the undermentioned facts to your notice: –
Inflated ( non-existent ) hard currency and bank balances of Rs.5040 crore ( as against Rs.5361 crore as reflected in the books )
An accumulated involvement of Rs.376 crore which is non-existent.
An unostentatious liability of Rs.1230 crore on history of financess arranged by me.
An exaggerated debitors place of Rs.490 crore ( as against Rs.2651 reflected in the books )
4.4: Tech-Mahindra Satyam trade: –
After the cozenage, Satyam ‘s status took a bend for the worse. Hence, the Government seceded to name four managers for Satyam boulder clay person took over Satyam and made conditions better for Satyam. Later, the Government held a command for the coup d’etat of Satyam Computers.
Now, even though Satyam has been labeled as a scam-tainted company, IT analysts consider Satyam Computers to be a good trade in order for the farther development of any company which has a range for growing. One company which has strong expertness across verticals and would profit the most with this acquisition would be IBM as it would be able to capitalise on its ain strengths and the advantages of this trade. Cognizant, the US based company was another rival in the race for the acquisition of Satyam. This acquisition of Satyam would help Cognizant in constructing a important graduated table and would hence present it into the large conference of IT participants.
However, the unexpected victor turned out to be Tech Mahindra, coming out from the blue and taking the command by storm. Tech Mahindra had bid for Satyam Computer at Rs 58 per portion which was the highest as compared to the remainder of the bidders. Tech Mahindra offered an sum of Rs 1, 757 crore for a 31 % interest in Satyam Computers. No other command was within at least 90 per cent of Tech Mahindra ‘s command. The other rivals were L & A ; T and WL Ross and their commands stood at Rs46/ portion and Rs 20/share severally. Other rivals were Spice Corp, IBM and iGATE, who, after demoing an involvement in purchasing the company, opted out of the command. On April 13, 2009, it was announced that IT services supplier Tech Mahindra had offered the highest command for Satyam Computers and had truly become its new proprietor. However, Tech Mahindra announced that Satyam would be operated as an independent company with its separate liabilities.
Part V: Analysis
5.1: Benefits behind the coup d’etat of Satyam by Tech Mahindra ( Through SWOT and PEST Analysis ) : –[ 5 ]
The Mahindra Group is one of the top 10 industrial houses in India. It has proven to be a innovator in the car industry and is besides a innovator in the cardinal sectors of the Indian economic system. Tech Mahindra ( IT ) is a supplier of solutions and services to the telecommunications industry, with a bulk interest owned by Mahindra & A ; Mahindra Limited, in partnership with British Telecommunications plc.
The Mahindra group, although strong in the car industry, is non well-balanced in the IT sector. Hence, it needed to diversify itself into the IT sector and make a name for itself at that place merely like it has done in the cars and farm equipment sectors. Having a strong clasp in the IT sector would turn out good for Mahindra as it would heighten its versatility. The ruin of the IT service giant Satyam Computers provided a discovery for Tech Mahindra. Tech Mahindra won the command for Satyam at the monetary value of Rs 58/ portion in the presence of giants like IBM, iGATE, L & A ; T and WL Ross.
After Tech Mahindra won the command for Satyam Computers, Anand Mahindra, the proprietor of The Mahindra Group revealed the motivation behind the coup d’etat stating, “ We want to be the leader in the IT field and that is our vision for Mahindra Satyam. But right now, the immediate undertaking is to convey the company back on path. ” Tech Mahindra prior to the acquisition specialized in Telecom services, Equipment fabrication, Software vendoring and in System Integration. Whereas after the acquisition, they would specialise in other Fieldss where they have a deficiency of experience like Consulting services, Outsourcing solutions, Engineering and Product Development, Supply Chain direction, Business Intelligence, Enterprise Integration, Infrastructure direction, etc.
Satyam besides provides technology services to many of the constituent makers in the universe today particularly in Sheet Metal Parts and Fabrication which are used in Automobile and Electrical Industries. This trade with Satyam would besides present Tech Mahindra into new industries runing from fabricating to fiscal services. It would besides present Satyam into the Aerospace Industry as Satyam has a strong presence in it. With skill strength of about 6,000 applied scientists, the work in this perpendicular would be dealt with efficaciously.
Through this coup d’etat, Tech Mahindra has become the 4th largest IT service house in India ranked merely infinites behind local giants such as Tata Consultancy Services, Wipro Technologies and Infosys Technologies. Prior to this coup d’etat, Tech Mahindra drew about 50 % of its grosss from a individual client- British Telecom plc. But with the coup d’etat of Satyam, they would be serving the clients of Satyam like Ford, Opel, etc. who require designs, drawings, etc. from the applied scientists of Satyam. Mr. C.P. Gurnani, the to-be CEO of Mahindra Satyam said that it would be good for Satyam to be associated with the 65- twelvemonth old Tech Mahindra. This is because of the fact that the company would acquire about 110 of Tech Mahindra ‘s clients for the Enterprises Services concern. One of the large undertakings would be to acquire Satyam back on path as there would be many challenges that have to be faced after the coup d’etat. These challenges will be quoted below.
5.2: Challenges for Tech Mahindra ( Through SWOT and PEST Analysis ) : –[ 6 ]
The biggest challenge that Tech Mahindra will hold to face is that they have to cut down the work force to an optimal degree which will be a hard undertaking as Satyam Computers has approximately 50,000 employees most of whom are in uneffective places whom Tech Mahindra can layoff.
1. Another large challenge for Tech Mahindra will be to recover client assurance.
2. Tech Mahindra does non hold the equal experience in all of Satyam ‘s concern verticals and it will be a challenge to cover with the issues associating to these verticals.
3. Tech Mahindra has to finish all the legal liabilities of Satyam Computers.
4. Tech Mahindra has to confront challenge of unifying the work civilizations of both the companies as the work civilizations of both the companies are non similar. It besides has to confront the challenge of winning over the trust of the employees of Satyam and other human resource direction issues.
5. It will besides be a challenge for Tech Mahindra to mend the balance sheet of the scam-tainted company as it will be hard to cognize as to where the lost money has gone. Another challenge will be to demo the existent net incomes and losingss of Satyam Computers.
6. The stairss taken by Tech Mahindra have to be chosen really carefully as they are now pull offing one of the biggest IT giants in India. Any incorrect move may ensue in really desperate fortunes for Tech Mahindra.
5.3: Analysis OF THE GRAPHS SHOWING THE SHARE PRICE: Graphs Showing the Share Price of Satyam Computers and Tech Mahindra before and after the cozenage and the Coup d’etat:
Graph Showing the Share Price of Satyam Computers before the cozenage
Share monetary value High before the cozenage and the coup d’etat
Graphs demoing the portion monetary value of Tech Mahindra before and since the coup d’etat
Steady Increase in Share Price Since coup d’etat
Steep autumn in portion monetary value due to the cozenage
Graphs demoing the achievements of Tech Mahindra since the coup d’etat
Before the Coup d’etat
Since the Coup d’etat
Graph Showing the Steady Increase in portion monetary value since the Coup d’etat
The above graphs clearly conveying to illume the benefits that Tech Mahindra has acquired through this coup d’etat. As we can see, the portion monetary value of Satyam which was surging at a high degree before the cozenage went down to a drastic portion monetary value of Rs 6/ portion. This can be seen in the graphs above demoing the historic monetary values of Satyam. However, we can besides look at the benefits which Tech Mahindra and Satyam have reaped since the coup d’etat. The portion monetary value of Tech Mahindra has been increasing steadily since the coup d’etat ; from a low monetary value of Rs 6.20 PS to a truly high portion monetary value value since Jan-Feb 2009, the clip of the coup d’etat which rescued Tech Mahindra from a slack at that period of clip.
5.4: The Stairss That should be taken by Tech Mahindra at this Phase ( Through wheel of luck: pre-merger and Post Merger Analysis ) :[ 7 ]
Tech Mahindra, now, after the coup d’etat needs to concentrate on incorporating the different work civilizations and forms of Tech Mahindra and Satyam. In order to better the conditions of the workplace, this measure is really important as it may do or interrupt the conditions in the workplace. This would besides be an of import plus in order to actuate the employees from both the companies, Satyam and Tech Mahindra. In order to make so efficaciously, what is critical is research and planning.
Phase 1 and 2: Negotiation and proclamation ; Acquisition Integration exercise:
These two stages are really important to the company as it may do or interrupt the trade. Tech Mahindra should carry on a thorough research into its employees every bit good as Satyam ‘s employees in order to make a sense of harmoniousness in the workplace environment. With a thorough research, they will be able to look at the forces which will be able to actuate the employees to a considerable extent ; so much so that, they will be able to work together. Tech Mahindra needs to name an integrating director whose chief purpose will be to incorporate the work civilizations of both the companies. This director must guarantee that the employees of both the companies will be able to work and co-exist with each other. Besides, communicating schemes should be implemented so as to make full the nothingness which would be between the co-ordination of the two working civilizations and forms. The director should be officially introduced to the employees of both the companies and besides, a sufficient engagement of the higher up functionaries should be outstanding.
Phase 3 and 4: Course Assessment and Adjustment ; Long-run program rating and Adjustment:
These two stages are every bit of import as they would bank on the hereafter of the companies in the long tally. The class appraisal and the long-run program rating and accommodation would clearly assist Tech Mahindra in finding as to what stairss should be taken subsequently on. Tech Mahindra should take up procedure function and exercise in order to speed up the integrating program since the employees would besides wish to put marks for themselves for the shooting every bit good as the long-run. It would besides be really helpful for Tech Mahindra to set-up audit staffs in order to treat the audits which would be able to assist Mahindra-Satyam to indicate out their ain defects, largely internal defects. Mahindra Satyam should besides choose to set about primary research which would be utile in order for them to recognize the company ‘s defects so that they can larn and continually accommodate to the integrating procedure. Besides, short-run and long-run direction exchange should be conducted so as to supply the employees with an exposure to the assorted countries of Mahindra Satyam which would do them versatile in all the Fieldss and would hence better the overall teamwork and co-operation of the employees. In bend, this would so better the overall efficiency of the concern.
Therefore, we have seen as to what stairss should be taken by Tech Mahindra in order to better the integrating procedure and besides how to better its efficiency.
5.5: Lewins ‘ Force Field analysis ( Driving and restraining forces are extracted from SWOT and PEST analysis ) :
Coup d’etat of Satyam by Tech Mahindra: Yes or no?
The followers are the impulsive forces of Lewins ‘ force field which would promote Tech Mahindra to travel in front with the acquisition. After the acquisition of Satyam, they would specialise in other Fieldss where they have a deficiency of experience like Consulting services, Outsourcing solutions, Engineering and Product Development, Supply Chain direction, Business Intelligence, Enterprise Integration, Infrastructure direction, etc. This trade with Satyam would besides convey Tech Mahindra into new industries from fabricating to fiscal services. It would besides present Satyam into the Aerospace Industry as Satyam has a strong presence in it. Prior to this coup d’etat, Tech Mahindra drew about 50 % of its grosss from a individual client- British Telecom plc. But with the coup d’etat of Satyam, they would be serving the clients of Satyam like Ford, Opel, etc. who require designs, drawings, etc. from the applied scientists.
Tech Mahindra can non account for its deficiency of experience in all of Satyam ‘s verticals. Due to this, managing these many verticals of a individual company such as Satyam along with its ain verticals would turn out to be an acclivitous undertaking for Tech Mahindra. Since Satyam Computers is now labeled as a scam-tainted one, recovering its client assurance will besides be a hard undertaking for Tech Mahindra. Tech Mahindra would besides necessitate to finish all the legal liabilities of Satyam Computers. This would once more be a extremely hard and clip devouring undertaking due to victimize that took topographic point. Reducing the colossal work force of 52,000 employees of Satyam Computers to an optimal degree of employees will besides turn out to be slippery. Since the fiscal paperss and balance sheets have been tampered with by Ramalinga Raju and his director, repairing the defects in the fiscal paperss of the scam-tainted company will besides be a large challenge.
Hence, by looking at the drive and the restraining forces which come up when the coup d’etat is analyzed, we can see that the drive forces account for more and their cause is much heavier than that of the restraining forces as the drive forces would account for a big sum of Tech Mahindra ‘s net income and Mahindra ‘s repute. Hence, through the Lewins ‘ forces field analysis, we can state that Tech Mahindra should be recommended to get Satyam Computers.
Part VI: Decision AND RECOMMENDATIONS
The research findings and the tools used to analyse the instance, conveying about the decision that Tech Mahindra should so travel in front with the acquisition of Satyam Computers. The SWOT and PEST analysis of Tech Mahindra and Satyam would so give us the advantages of the disadvantages of the coup d’etat. Furthermore, the Lewins ‘ force field would besides assist in order to do a concrete decision about the coup d’etat. Besides, the graphs demoing the portion monetary value of Tech Mahindra and Satyam would be helpful in comparing the net incomes and the grosss of both the companies and would bespeak as to how the companies were doing before the coup d’etat and besides after the coup d’etat. Hence, looking at all the tools and questionnaires, it can be concluded that Tech Mahindra can so travel in front with the acquisition of Satyam.