Tech Mahindra, Mahindra Satyam extend gains, up 4% each

Shares of Tech Mahindra and Satyam Computer Services (Mahindra Satyam) are trading higher by 4% each, extending their over 8% rally in past two days, after the announcement of the merger of Mahindra Satyam with Tech Mahindra.

Tech Mahindra is trading at Rs 712 and Mahindra Satyam at Rs 80.70 on the Bombay Stock Exchange.

The existing shareholders of Mahindra Satyam will get two shares of Tech Mahindra for every 17 shares held.

According to analyst, the merger with Mahindra Satyam will offer telecom-focused Tech Mahindra the much-needed diversity in solution offerings across verticals. The combined entity will also be able to generate higher shareholder value through cross-selling, cost rationalisation and better employee utilisation.

“With this size, the combined entity stands a good chance of getting bigger business, bigger projects and bigger clients. Further, the combined entity can cater to more project verticals in comparison to the standalone basis by these companies. However, it will take considerable effort and time for the combined entity to reach the league of Infosys / TCS," said Jagannadham Thunuguntla, strategist & head of research, SMC Global Securities on his observations on the Tech Mahindra, Mahindra Satyam merger.

“Overall, it is a merger which is proving to be win-win for all the parties involved and is a logical transaction, as this Mahindra group to consolidate their IT assets under one roof," he added.