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BT exits Tech Mahindra by completing stake sale

Source : BUSINESS_STANDARD
Last Updated: Wed, Dec 12, 2012 21:36 hrs

BT Group Plc today completed the sale of its remaining 9.1 per cent holding in Tech Mahindra, bringing to an end an association of over 26 years. BT and Mahindra & Mahindra had entered into a joint venture in 1986 to create Tech Mahindra.

“BT has today completed the sale of its remaining 9.1 per cent shareholding (11.6 million shares) in Tech Mahindra to institutional investors for total gross cash proceeds of Rs 1,011.4 crore (£115.7 million) at Rs 871 a share,” said the company.

While Credit Suisse (Singapore) has bought 390,000 shares in Tech Mahindra from BT, Birla Mutual Fund has bought 120,000 and HDFC Life 160,000.

Some of the other investors who bought the shares sold by BT include Prudential Mutual fund (1.4 million), Halbis (5.7 million), Soros (120,000), SBI Mutual Fund (700,000), SBI Life (350,000) and Goldman Sachs (125,000).

Tech Mahindra’s stock was up 6 per cent during intra-day trading. The company’s stock closed at Rs 910.8 per share, up 3.69 per cent compared to the previous days close of Rs 878.4.

BT also confirmed that Tech Mahindra remains to be a key supplier. BT that contributes about 33 per cent (for the quarter ended September 30, 2012) to the company’s revenue is the largest client for the company. It will also continue to be the largest client in the merged entity of Tech Mahindra and Mahindra Satyam. In the merged entity BT’s contribution will be around 17-18 per cent.

Analyst tracking the company feel that the stake sale is a positive for the company. “BT stake sale was an overhang on the stock, with this sale it is removed. As for the business from BT, Tech Mahindra has managed to increase their wallet share by 2 per cent during the restructuring of contracts,” said Ankita Somani, research analyst, Angel Broking.

Over the past few quarters, Tech Mahindra has reported fall in revenue from BT. For the quarter ended September 30, 2012, BT’s business to Tech Mahindra was down by 3.6 per cent. On the other hand Tech Mahindra has been able to grow its non-BT business. The recent acquisitions done by the company will also help it to further reduce its dependence on BT.

“BT overall has been wanting to bring down its IT spends. Within that, we have managed to grow our share. Almost 65 per cent of BT's IT work is managed by Tech Mahindra, whereas 30-33 per cent is with global vendors. With BT revenues of $400-350 million, it is the single largest account for us and biggest when compared to others,” Vineet Nayyar, executive vice-chairman of Tech Mahindra, had said after the company announced its September results.

BT also confirmed that Tech Mahindra remains to be a key supplier. BT that contributes about 33 per cent (for the quarter ended September 30, 2012) to the company’s revenue is the largest client for the company. It will also continue to be the largest client in the merged entity of Tech Mahindra and Mahindra Satyam. In the merged entity BT’s contribution will be around 17-18 per cent.

Analyst tracking the company feel that the stake sale is a positive for the company. “BT stake sale was an overhang on the stock, with this sale it is removed. As for the business from BT, Tech Mahindra has managed to increase their wallet share by 2 per cent during the restructuring of contracts,” said Ankita Somani, research analyst, Angel Broking.

Over the past few quarters, Tech Mahindra has reported fall in revenue from BT. For the quarter ended September 30, 2012, BT’s business to Tech Mahindra was down by 3.6 per cent. On the other hand Tech Mahindra has been able to grow its non-BT business. The recent acquisitions done by the company will also help it to further reduce its dependence on BT.

“BT overall has been wanting to bring down its IT spends. Within that, we have managed to grow our share. Almost 65 per cent of BT's IT work is managed by Tech Mahindra, whereas 30-33 per cent is with global vendors. With BT revenues of $400-350 million, it is the single largest account for us and biggest when compared to others,” Vineet Nayyar, executive vice-chairman of Tech Mahindra, had said after the company announced its September results.



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