Tech Mahindra will issue NCDs to raise funds for Satyam buy

Mumbai: With just five days left to deposit Rs1,756 crore for 31% stake in Satyam Computer Services Ltd, Tech Mahindra Ltd is raising money from banks, mutual funds and insurers by selling non-convertible debentures (NCDs) and commercial papers (CPs).

Tech Mahindra plans to raise Rs875 crore through NCDs and CPs, people familiar with the developments said on condition of anonymity.

The firm plans to issue two NCDs of Rs300 crore each that would mature in four and five years, respectively, at a coupon rate of 10.25%. The company also plans to raise Rs275 crore through CPs, they said. Coupon rate of a bond is the amount of interest paid per year expressed as a percentage of the face value of the bond.

The people said state-owned Corporation Bank plans to subscribe to Rs100 crore of NCDs, while private sector lender Yes Bank Ltd will pick up about Rs150 crore of the debentures.

Private insurers Kotak Mahindra Old Mutual Life Insurance Ltd and Birla Sun Life Insurance Co. Ltd have subscribed to Rs25 crore each, they said. State-owned Life Insurance Corp. of India is also one of the subscribers, but the figure is not known yet. From the mutual funds, ICICI Prudential Asset Management Co. is said to have subscribed to Rs150 crore. The firm declined comment on the matter. UTI Mutual Fund is considering subscribing to Rs100 crore but is yet to decide whether to buy NCDs or CPs, the people said. Reliance Mutual Fund is believed to have subscribed to one-year CP of Rs275 crore, they said.

Tech Mahindra wins Satyam bid at Rs 58 per share

Tech Mahindra has won the bid for Satyam Computer Services. The long-drawn race finally drew to a close as it was confirmed that Tech Mahindra bid for Satyam at Rs 58 per share, while Larsen & Toubro, the other player in the fray, bid at Rs 49.50 per share.

Tech Mahindra will have to pay Rs 1757 crore for 31% at Rs 58 per share, whereas for the total 51% stake the company will have to pay Rs 2890 crore. Satyam will now have a market capitalization of Rs 5666 crore on expanded equity. Sources say that Tech Mahindra may rope in PE investor and will subscribe to additional equity to a PE partner.

The eagerly awaited Satyam bidding process started in Mumbai today. The deadline for submission of the final bid for Satyam was 9 am, April 13, 2009. The bidders submitted two envelopes; one a technical bid and second a financial bid.

Only a bidder who cleared the technical bid qualifies for the financial bid. In case of a 10% differential between one or more bids and the highest bid, then an open auction would be triggered. L&T, Tech Mahindra, Cognizant and Wilbur Ross were believed to be in the fray for acquiring the company.

The deadline for submission of the final bid for Satyam was 9 am. There are two envelopes, which will be submitted to the Board. One will be a technical bid and one will be financial bid. The technical bid will be opened first and the financial bids of only those bids which satisfy the technical bid will be opened for the second round. In the second round, these financial bids will be ordered from the lowest to the highest and the highest bidder will then be looked at.

If there is another bid which is 90% of the highest bid then there is going to be a series of open auction till you a very clear cut highest bidder emerges. So the board today is likely to recommend this highest bidder to the Company Law Board (CLB) and then CLB will take its view and announce the final bidders. This is likely to happen by the end of this week. The recommendation to the CLB can go today or tomorrow.