The Sunrise….

September 15, 2008

TCS buying stake in TechMahindra?

Following earlier reports that British Telecom (BT) may actually exit its Indian joint venture with Tech Mahindra, new speculations say that the stake may be acquired by Tata Consultancy Services (TCS). BT has 31 percent stake in Tech Mahindra.

Analysts say that this development may be due to two reasons. Firstly TCS is strong on the telecom business vertical and secondly BT is a valued customer for the software major.

Looking to exit from the Indian venture Tech Mahindra, British Telecom (BT) is understood to have offered its 31% stake to Tata group company TCS. BT may be mulling to exit totally from the venture, sources said, but no confirmation could be obtained either from the British entity or the Indian corporate house.

Asked if British telecom had approached with its offer to sell its total or part stake, a TCS spokesperson said “We do not comment on market speculation”. Sources said the approach could have been driven out of synergistic angle as TCS has a thriving telecom practice and most importantly BT is a valued customer of TCS.

It is also not clear at this stage whether BT has kept Mahindra & Mahindra, the single largest stakeholder with 44% share in Tech Mahindra, is in the loop about its latest move. Although the valuation of the company has not yet been done by any professional investment banker, the market cap of the company is close to $2.5 billion as per the current share price of firm.

At the close of trading on Friday, Tech Mahindra quoted at Rs 759.75, down 2.42% on BSE. Asked if the company has talked to TCS, BT spokesperson stated “BT does not comment on rumours and speculation. BT has operations and investments worldwide which we regularly review. India remains a critical market both for BT and our customers, and we expect to continue developing both the operational network and service that we have established over a number of years”.

Tech Mahindra, which has 65% of its revenue coming from BT, recently got a $700-million contract from a UK company. According to an analyst, BT’s exit may prompt other telecom rivals to look at business opportunities with Tech Mahindra. Tech Mahindra spokesperson said, “We do not comment on rumors and speculation. As a strategic partner of BT, we have enjoyed a great relationship with BT over many years and will continue delivering on long term contracts and winning new business.”

PS.: Reports direcly taken from some national dailies.

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