March 21st, 2012

Tech Mahindra-Mahindra Satyam merger approved; swap ratio of 2:17:

The boards of Tech Mahindra and Mahindra Satyam have approved their merger with a swap ratio of 2:17. This means two shares of Tech Mahindra will be given for every 17 shares of Mahindra Satyam.

All assets & liabilities of Mahindra Satyam will be transferred to Tech Mahindra at book. Also, 20.4 crore Satyam shares will be transferred to Tech Mahindra Trust. The appointed date of scheme will be April 1, 2011.

The merger makes Tech Mahindra the fifth largest IT company by market cap. British Telecom holds 23.2% stake in Tech Mah.

Deutsche on Tech Mahindra:

-‘Buy’ rating, with target price of Rs 1,000
-Merge to be EPS dilutive initially
-Estimate FY13E EPS to be lowered by 9% to Rs 79
-Expect valuation discount vs other large caps to narrow
-Merged entity to have 45% discount to HCL Tech

The Tech Mahindra management spoke at a press conference on the merger. Here are the key takeaways:

-British Telecom to own 12.8% in new company
-10.4% stake to be held as treasury stock
-New entity to have $2.4 bn in revenue
-New entity to have 350 active clients; 75,000 employers
-Mahindra group to own 26.3% in combined entity
-Merged co to get 42% revenue from us & 35% from Europe
-In a position to give a much better value proposition
-Combined entity will have 75,000 employees, 350 clients
-Combined entity will have revenues of $2.4 bn
-Shown improvement in performance over last 6 quarters
-To focus on telecom ERP mobility post merger
-Merger process to take 6-9 months
-Will take it to HC of AP & Maharashtra for approvals
-Achieved all targets set for ourselves
-Merged entity to get 18-19% revenue from BT Group
-35 mn Tech Mahindra shares will be cancelled out
-EBITDA for merged entity is 17%
-A Trust will hold 10% of the merged entity
-To get consultants for merged entity's branding
-Both organisations have levers to improve margins
-Yet to finalise mgmt structure for merged entity
-Expect zero redundancies in staff
-Branding of the new entity will be decided in due course
-Will need approvals from CCI, stock exchanges
-Last 12 months combined entity revenue at $2,432 mn
-Last 12 months combined entity EBITDA at $392 mn

Vineet Nayyar
-Board accepted recommendations of investment banks for merger
-To approach AP, Maharashtra HC for approval of merger
-Process of merger to take 6-9 months for completion
-To focus on telecom, mobility, engineering post merger
-To take decision on branding in-time
-Already working on new mgmt structure

CP Gurnani
-Satyam performance consistent in past six quarters
-Merged co can leverage into new edge technology


IIM placements 2012 talks big money yet again:

It is that time of the year again when large global companies come to India to pick the best of talents for the best of price! The Indian Institute of Management (IIMs) across the country warmed up to begin the placement sessions in March, and there were new happy endings echoed from each corner of the country.

The esteemed management school of the country has not only maintained its placement story, but also outperformed itself in some cases. For instance, IIM- Calcutta’s (IIM-C), interviews were slotted to be held over five days; however, in just four days flat each of the 356 students bagged a job. Moreover, the total count of offers made, stood at 423, which meant that some of the students managed to get hold of more than one offer!

The institute saw an impressive response from FMCG, telecom, media and pharmacy companies like P&G, HUL, ITC, Kraft Cadbury, Nestle and Johnson & Johnson, Bharti Airtel, Vodafone, Biocon, GSK Pharma, Novartis and Times Group. Moreover, technology major Lenovo recruited for the very first time from IIM-C.

On the other hand, IIM-Ahmedabad (IIM-A), got the deemed Boston Consulting Group to issue offers to 17 graduates, compared to 11 offers last year. The institute has also been able to attract renowned consulting companies such as McKinsey, Bain & Co, AT Kearney, Accenture and Oliver Wyman. The average salary being offered to the students is estimated to be around Rs 22 lakh to Rs 27 lakh.

The content story continued as IIM-Bangalore (IIM-B) concluded its placement process with 423 offers from 126 companies for 363 PGP students. IIM-B officials reportedly said that this was the biggest group recruited in the institute’s placement history. Of these 423 offers, 206 offers were made during the final placement, 124 during lateral placements and the remaining 93 were pre-placement offers (PPOs).

Consultancy sector was the major employer at IIM-B, employing upto 30% of the students. Finance and sales-marketing sectors followed close on heels and employed 22% and 21% of students respectively. The institute also saw as many as 36 first-timers including Zynga, Redbus, Development Bank of Singapore and Raymond.

Though the placement saga ended on a happy note for IIM-B, the institute has seen a steady drop in overseas offers this year due to the slowdown seen in the global economy. Last year, there were 74 overseas offers made, as compared to 43 offers this year. However, of the 74 overseas offers made in 2011 only 54 students had opted for them, but this year, 41 have accepted the overseas offer. Offers were made by firms based out of Hong Kong, Singapore, Dubai, London, Paris, New Jersey, Dallas, Seoul and Switzerland.

IIM-Lucknow (IIM-L) had 57 first-timer recruiters like Michael Page International, Target Retail and Ingersoll Rand. IIM-L, had a total of 446 offers being made by 216 companies for the 389 graduating students of 2012 batch.

At IIM-Kozhikode (IIM-K), first-time recruiters increased by an appalling 47%, which included Global Environment Consulting (GEC), String Infotech, Head Hunters and Arbitron. Around 135 companies participated in the placements this year and IIM-K witnessed a top international pay package of $150,000, which was offered by a Europe-based investment bank. The institute also attracted start-up companies like Sports Cradle, Global Environment Concern, Neudesic and Heckyl.

Following the success stories of its counterparts, on a rather disturbing note, IIM-Indore has chalked out a plan to partner with some placement firms to get all the 450 students in its current batch recruited. The institute is reportedly in talks with around five agencies.

Govt pays Rs 2,500 cr to Vodafone after SC rejects review petition in tax case:

The Supreme Court has rejected the government's review petition in the Rs 11,000 crore Vodafone tax case.

Earlier in January, the Supreme Court had ruled in favour of Vodafone - observing that the income-tax authorities have no jurisdiction to tax Vodafone's $2.2 billion purchase of a majority stake in the Indian mobile unit of Hong Kong-based Hutchison Whampoa.

News came in last evening that the IT Deparment has handed over Rs 2,500 crore to Vodafone and that too with interest of 4%.

Union Budget 2012 had proposed to tax such transactions retrospectively. So the government can still send fresh notice to Vodafone, but it will have to wait till the Budget is passed.

Reacting to the entire incident, law minister Salman Khurshid said that the dismissal of the review petition and the Finance Bill can't be linked and that the consequence will be different once the government amends the IT Act. “Finance Bill will have separate consequences for government, Vodafone. Consequences may be convergent with Supreme Court's verdict,” he said.

Source: http://www.yourmoneysite.com



Vodafone will have to pay tax if I-T Act is amended: Govt:

British telecom major Vodafone will have to pay over Rs 11,000 crore tax, once the amendment to change the Income Tax Act is approved by Parliament, a Finance Ministry official said today.

"They (Vodafone) will have to automatically pay the tax after approval of the amendments to the Finance Bill by Parliament. We don't need to send fresh tax demand notice to them," a Finance Ministry official said.

The government yesterday refunded Rs 2,500 crore along with 4% interest to Vodafone following dismissal of its review petition against January 20 order by the Supreme Court.

The government had raised a Rs 11,000 crore withholding tax demand on UK-based telecom firm for its $11 billion acquisition deal with Hutchison Essar in 2007.

With an aim to clarify the "intent" of the Income Tax 1961 on taxation of overseas deals involving domestic assets, Finance Minister Pranab Mukherjee in his 2012-13 Budget has proposed to amend the law with retrospective effect, to ensure that such deals are taxed.

"You can only tax on the basis of existing law. We have no right to tax them, current law will prevail so long law is not changed," Law Minister Salman Khurshid had said yesterday after a meeting of senior Cabinet Ministers following dismissal of review petition by the apex court.

According to the Finance Ministry official, "an important question is about equity in taxation. While ordinary tax payer pays its taxes honestly, those who have huge wealth do not pay taxes by taking recourse to tax avoidance through creation of multiple structures and routing their investments through low tax and no tax jurisdiction."

In the $11.2 billion deal in May 2007, Vodafone had acquired 67 percent stake in the Hutchison-Essar Ltd (HEL) from Hong Kong-based Hutchison Group through companies based in the Netherlands and Cayman Island.

Source: www.business-standard.com