The Mahindra Group had toyed with the idea of merging with Satyam Computer Services a year before the Hyderabad-based IT company went bust, its Chairman Anand Mahindra said on Friday. A proposal was made to Satyam’s chairman Ramalinga Raju, but he never reverted back on the proposal, Mahindra said, wondering if it was due to the faulty books of the company.
“Knowing him as I did, I had approached him the year before for a potential merger with Tech M,” Mahindra said, speaking at the launch of a book tracing the 100-day journey in 2009 between Raju’s explosive letter to exchanges confessing to a Rs 5,000 crore scam and Mahindra group’s Tech Mahindra being chosen by a government-appointed board to take over the company in April 2009.
Mahindra said he knew Raju because of his involvement in setting up the Indian School of Business in Hyderabad, and added that the offer was made because of the evident complementarities that existed between Tech M and Satyam.
Tech M, which had a revenue of USD 1 billion then and was raring for breaking out into becoming a much bigger organisation, was looking at inorganic opportunities, Mahindra said, adding that while his group company was focused on European clients, Satyam was focused on the American market.
No other Indian IT company was keen to touch Satyam because of the obvious taint and also lack of complementarities, Mahindra said, adding that engineering major L&T was the only other serious suitor it had to face.
Admitting that L&T’s chairman was “notorious” for his aggressive bidding ways, Mahindra shared that novel ways were deployed to outwit competition.
The prime strategy was talking down interest in the company, wherein Mahindra Group executives made statements pointing to the conservative nature of the auto-industry focused group, and some other ones like ensuring that group executive Vineet Nayyar was not seen stepping out of a hotel at all in order to drop-off any hints.
However, deep down, an enterprise value was arrived after putting a price on the quality of work done, the people and the possible contingencies like legal claims, he said. Ultimately, the Mahindra group was successful in outwitting by getting the winning bid at Rs 58 per share as against the Rs 45.90 a share bid by L&T.
In hindsight, Mahindra said Raju never came back on the original offer because proceeding ahead would have forced him to show the fudged account books and the scam would have been unearthed.
Mahindra also said that he had not shared this wish to merge with Satyam with anyone at Tech Mahindra as well, and had only consulted on the same with finance industry veteran Deepak Parekh, who finally went on to be on the six-member rescue board after Raju’s letter.
The head of the diversified group said the only “surprise” was the then government’s stance, pointing out that investigative agencies, including the Enforcement Directorate kept coming with notices despite the rescue act being mounted.
He also said that the auditors should not be let off the hook completely, and there should be sufficient red flags which get triggered the moment some wrongful act is attempted and added that the role of independent directors is important.
Pointing out to T N Manoharan, one of the six to be appointed as special directors on Satyam, who is the co-author of the book and also sits on the Mahindra board, Anand Mahindra said outspoken directors are an asset who help build enterprises.
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