Tech Mahindra-Mahindra Satyam merger: Microsec inputs - ET
RAJESH DESAI
Dear Sir/Madam,
Please find the link of Microsec Research Coverage in Economic Times Website .
21 Mar, 2012, 12.48PM IST, The writer has posted comments on this articleEconomictimes.com and Agencies
Tech Mahindra-Mahindra Satyam merger: Exchange ratio of 2:17 positive for Tech M, say analysts
NEW
DELHI: Shares of Tech
Mahindra rallied on Wednesday after its board approved merger with Mahindra
Satyam to create the fifth largest software services exporter by market
value.
The merger will result in combined revenue of about $2.4 billion and more than
350 clients across different geographies and industrial sectors, Tech Mahindra
said in a statement on Wednesday.
Mahindra Satyam shareholders will get one share of Tech Mahindra for 8.5 shares
of Satyam, the companies said.
According to analysts, the swap ratio of 8.5 shares of Satyam for every share
in Tech Mahindra is positive for Tech Mahindra at current prices.
"The swap ratio of 2:17 for the merger was inline with market
expectations, however the ratio was bit favourable to Tech Mahindra," said
Sanjeev Hota - AVP Research, Sharekhan Ltd
"On
a broader basis, the combined entity now have a size and strength to bid for
larger ticket size deals and also the merged entity revenues stream would be
much more diversified than earlier," added Sanjeev.
"As per the terms
decided for amalgamation, 204,000,000 shares of Mahindra Satyam will be
transferred to a trust, in which Tech Mahindra will be the beneficiary,"
said Nitin Prakash Daga, AVP - Research, Microsec Capital Ltd.
Tech Mahindra, a unit of Mahindra & Mahindra, took over Satyam in April
2009 and rebranded it as Mahindra Satyam.
We have looked at scenarios based on synergies from the deal. Tech Mahindra stock could see some near-term upside due to the related news flow. Longer-term benefits could come in the form of (a) marketcap/scale bringing in new set of investors; (b) Inclusion in indices resulting in upsides," brokerage firm Citi said in a report.
"However,
given the challenges in Tech Mahindra's core business and our concerns on the
macro, we remain Neutral. We continue to prefer Wipro
and HCL
Technologies in the sector," added the Citi report.
The merger between technology outsourcing firms Mahindra Satyam and Tech
Mahindra will lead to the constitution of a new management structure to guide
the combined entity, sources close to the development told ET.
At 12:00 p.m., shares of Tech
Mahindra Ltd were trading 2.9% higher at Rs 667.05. The stock has hit a
high of Rs 680 and a low of Rs 649.40.
Shares of Mahindra Satyam slipped from its day's high of Rs 76.90 and are now trading 1.2% higher at Rs 75.05.
Analysts' Quote:
Jagannadham Thunuguntla, Equity Head, SMC Capital
The swap ratio for the merger is decided at two shares of Tech Mahindra for seventeen shares of Mahindra Satyam representing the ratio at 8.5. In that sense, there is no arbitrage opportunity left between the shares, more or less in line with expectations.
Our calculation shows that post merger, BT will end up owning about 11% in the combined entity because as of now they are holding about 23% in Tech Mahindra, but in the combined entity they will hold about 11%.
Ranajit Kumar Saha, Sr. Manager- Technical Research, Microsec capital Ltd
Tech Mahindra Limited:
The
medium term crucial resistance of Tech Mahindra is at 700. A breach of 700
means a bullish breakout of triangle pattern neck line and in that case it is
likely to go up to the level of 790 in the short term. The immediate strong
support of the stock is at 600. We recommend booking profit in the stock at the
current level. The fresh long positions can be initiated only above 700.
Mahindra Satyam
Satyam Computer Services has been moving in the narrow range of 60 and 80 since the last one year. This range-bound movement is expected to continue for another few days. We recommend booking profit in the stock at the current market price.
Regards,
Team Microsec Research
Microsec Capital Limited
Tel: 91 33 30512100
Fax: 91 33 30512020
--
CA. Rajesh Desai