Tech M eyes 2nd pref issue to up Satyam stake

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Mumbai: Tech Mahindra, the new owner of the Satyam Computer Services, is looking forward to a second round of preferential allotment of shares to increase its stake in the latter after an open offer evoked a weak response.

Tech Mahindra's chief financial officer, Sonjoy Anand, said the second preferential allotment would increase its stake in Satyam to about 42.7%. He said the current market price had hurt the open offer. "So, as expected, what has come through the open offer is less than 0.1%."

Tech Mahindra's agreement with Satyam allows it to raise the stake through a second round of preferential allotment if the open offer fails to get enough response. To buy more shares thorough the preferential issue, the company expects to spend Rs 1,155 crore it had set aside for the open offer, Anand said.

If the open offer for 20%, or 199 million shares, was successful, Tech Mahindra would have received 51% of Satyam. It will now have to spend more if it wants a majority holding since the preferential issue will enlarge the share capital.

Tech Mahindra had already taken about Rs 2,000 crore loans to fund the acquisition and an additional spend is expected to hurt the company.

In April, Tech Mahindra bought a 31% stake in Satyam after a bidding process at Rs 58 a share and subsequently renamed the company Mahindra Satyam. It had made the open offer for another 20% stake at the same price.

"We have not taken a view beyond the preferential allotment at the moment," Anand said when asked whether Tech Mahindra is considering raising its stake beyond 42.7%. Tech Mahindra is waiting for some "minor formalities" in the open-offer process to be completed for making a request to the Satyam board for the preferential issue, he said.

On the move

•The company mulls the step as an open offer evoked a weak response

•What has come through the open offer is less than 0.1%

•The company expects to spend Rs 1.15K cr for the issue