Merger forced Sanjay Kalra's hand

Mahindra Satyam’s Gurnani to be CEO after Tech M integration.

With the resignation on Friday of Tech Mahindra CEO Sanjay Kalra, the decks have been cleared for Mahindra Satyam CEO C P Gurnani to head the merged companies.

Fraud-hit Satyam Computer Services (rebranded Mahindra Satyam), which was acquired by Tech Mahindra in 2009, will start the process of integration from October 2010. Senior company officials said the exercise is likely to completed by FY11.

“The account restatement will take place by the end of September, as promised. We have done our best to get the numbers and have spent a fortune. The integration should take at least a year. The process should start by October,” said Vineet Nayyar, vice-chairman of Tech Mahindra, after the company announced its first-quarter results.

Nayyar, who is also managing director at Tech Mahindra, also told Business Standard, “Post the merger, we will have a single CEO heading the company. While I cannot say if it is C P Gurnani, but he certainly will be a candidate.”

Many within the company said Kalra quit Tech Mahindra as his role would have been very limited in the merged entity. Kalra spearheaded the BT relationship at Tech Mahindra. But BT, which holds 30.40 per cent stake in the company and contributes 45 per cent to Tech Mahindra’s revenues, will cease to be the largest client once the merger takes place. Its share in the total order book will come down to 20-25 per cent, analysts said.

In the third quarter of fiscal 2010, Tech Mahindra received £126 million (around Rs 850 crore) as a one-time restructuring fee from BT, and the company said it involved renegotiating the billing rates.

Though Tech Mahindra also said BT has committed to scaling up its contract in the next four years in the area of IT, BPO and networking, analysts feel there is no further headroom for growth on the BT account. This restructuring has anyway come at a price cut of 12-15 per cent. Tech Mahindra’s other large client is AT&T.

No one denies that Kalra’s role was crucial for the company. Under his leadership, Tech Mahindra’s non-BT revenue crossed the $500-million mark for the first time in the first quarter of this financial year. When asked whether Kalra’s exit would impact the BT business, Nayyar said that was unlikely. “With BT, we have challenges and as mature partners we will resolve them.”

Insiders said that the distance between Gurnani and Kalra widened after the former was appointed the head of Mahindra Satyam. Also, even while Kalra was CEO of Tech Mahindra, CFO Sonjay Anand and HR head Sujit Bakshi directly reported to Nayyar. “The arrangement was the same for Guranani as well at Mahindra Satyam. Both are more responsible for sales and delivery,” said a source familiar with the development.