Tech Mahindra will make a preferential issue to raise its holding in Satyam Computer Services to 42%, if its open offer, effective from Friday, flounders. Tech Mahindra CEO Vineet Nayyar said on Wednesday that in case ?we do not get adequate response (to the open offer), we will go in for a preferential issue to take our holdings in the company to 42%.? This effectively means the company will pay a higher price than the open offer price of Rs 58 for the Satyam shares.
Nayyar?s comments came after a wide gap emerged between the price offered by Tech Mahindra to buy 20% Satyam stake and the share?s closing price of Rs 81 on the Bombay Stock Exchange a day before the offer opened.
The shares have risen since Tuesday, when Satyam announced far better than expected results for the December quarter, showing a net profit of Rs 181 crore.
Making the prospects of the open offer more difficult, the government-appointed board has refused to endorse it, saying this could be construed as a ?negative statement? about Satyam fundamentals. ?The board believes that making a recommendation supporting the open public offer would be tantamount to recommending the shareholders sell their holding in Satyam,? said chairman Kiran Karnik in a letter to shareholders.
But the company, in a filing with the US SEC, said a senior executive would be tendering his holding in the company while other executives and directors would not.
Tech Mahindra, the IT arm of Mahindra & Mahindra Ltd, had acquired a 31% stake in Satyam in April for Rs 1,756 crore. As a mandatory follow-up to that, the company has made a Rs 1,154-crore open offer to public shareholders for an additional 20% stake.
As the open offer is kicked off, the management is simultaneously working on cutting costs and rationalising the company?s operations. To reduce the `people cost?, the company has officially declared a one-time programme, Virtual Pool, effective from 2009, to retain talent while cutting staff costs.
Satyam has 41,622 employees on its rolls, but Tech Mahindra had earlier said that 8,000-10,000 of them are surplus. It is reliably learnt that the company has by now sacked about 20% of its employees, especially in its BPO services, owing to fewer projects in hand.
Virtual Pool Program, applicable to employees in India, allows associates to take time off from their work for up to six months on a reduced pay, while they retain their job with the company. The company anticipates that about 10,000 associates will be part of this programme. This is more on the lines of Wipro?s `Enrich Program? in which salaries of the benched staff or those in the `business wait? period are slashed by up to 50% while they work for about two days a week.
?The Virtual Pool Program is an innovative way of retaining the excellent human assets of Satyam despite the difficult global economic situation?The Program is a unique way of retaining associates and developing them further through training, while ensuring the financial viability of the company,? said Karnik.
Virtual Pool associates will receive their basic pay, provident fund and medical insurance during the programme period. Based on business requirements, associates may be recalled and reinstated on full pay and benefits.
In a letter to the associates, AS Murthy, CEO, said: ?People-related costs account for almost 60% of our revenues. In our current situation, we have a sizeable number of associates who are not on billable assignments.?