Mon Apr 13, 2009 MUMBAI (Reuters) - Indian mid-sized IT outsourcer Tech Mahindra won a bidding auction for a majority stake in fraud-hit Satyam Computer Services Ltd , edging out Larsen & Toubro , seen by some analysts as the favorite bidder.
Tech Mahindra's shares surged by a quarter, before trimming gains.
Before Satyam's scandal was disclosed in January, Satyam was ranked India's fourth-largest outsourcing firm and Tech Mahindra was sixth-largest so the combined firm, even allowing for overstatement of accounts by Satyam, is expected to be the top-tier outsourcer.
The Satyam buy will help Tech Mahindra, in which Britain's BT Group holds about 31 percent stake, diversify its services by reducing its reliance on the telecoms industry.
The sale should help restore confidence in the local industry at a time the economic downturn has already slowed growth. So, the sale is supportive for leading Indian outsourcing rivals Tata Consultancy Services , Infosys Technologies and Wipro
Leading IT companies have always maintained Satyam was a one-off, not a reflection of the broader industry.
Tech Mahindra gets more than half its revenue from Europe, and the Satyam purchase would help it significantly expand its presence in the United States.
Tech Mahindra played the bid well, being most publicly reluctant to commit and continually expressed worries over Satyam's liabilities.
It has been three months and one week since India's biggest corporate scandal broke, and the government has been keen to limit the impact of the scandal. The decision comes just days before month-long voting in national elections starts.
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