Rising Satyam scrip may prompt fresh issue for Tech Mahindra

June 11th, 2009 - 8:31 pm ICT by IANS  

New Delhi, June 11 (IANS) The surge in the Satyam Computer Services scrip might prompt the scam-tainted IT major to issue fresh shares to its new owner Tech Mahindra, analysts say.
Tech Mahindra, which acquired 31 percent stake in Satyam in a global auction, is required under the bidding process stipulations to make an open offer for another 20 percent.

But existing shareholders may not be willing to part with their holding at a discounted market price.

Tech Mahindra’s open offer is to be made at Rs.58 per share. Since Mahindra’s 31 percent stake acquisition April 13 - when the Satyam scrip was priced at Rs.54.90 - the stock has soared.

It closed at Rs.80.85 on the Bombay Stock Exchange Thursday.

“This allotment would happen at the agreed price of Rs.58 per share, which is less than the current market price,” said Jagannadham Thunuguntla, equity head at SMC Capitals, one of India’s largest brokerage firms.

Because if this, there may not be too many takers for Tech Mahindra’s offer - which just might work out in favour of the Mahindra and Mahindra IT arm.

“It is highly unlikely that Tech Mahindra will up its offer price. They would rather prefer to go in for a preferential allotment,” noted Thunuguntla.

This is why: in the case of Satyam, market regulator Securities and Exchange Board of India (SEBI) has relaxed takeover norms to ensure 51 percent stake for the new owner.

Under this special concession, the investor has the right to subscribe to additional newly issued equity so that the resultant share is 51 percent.

“To that extent, it will work out in Tech Mahindra’s favour, though they have taken a gamble by bidding for Satyam,” added Thunuguntla.

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