BT Group, earlier known as British Telecommunications, owns a little over 23% equity in Tech Mahindra and is the largest customer - contributing 37% revenue - for the IT services firm that is part of vehicle maker Mahindra & Mahindra (M&M) group.
"The resignation of our nominee directors is a natural step in the progressive exit of BT as a shareholder ofTechM," said Dan Thomas, BT's Londonbased head of corporate media relations. He added that this should not come as a "big surprise" as the markets were aware of BT's intention to exit.
At Friday's closing price of Rs 570.29 per share Tech Mahindra has a market valuation of Rs 7,259 crore on the Bombay Stock Exchange. According to that BT's equity holding was worth Rs 1,686 crore on Friday.
Earlier in December 2010, the British company sold 5.5% in Tech Mahindra for Rs 451 crore, to M&M, which had waived its right of first refusal thus giving BT the freedom to sell in open market. Most recently, Times of India reported in October that private equity firms Carlyle Group and Advent International are in talks with BT for buying its equity in TechM.
"BT feels it may not be a good thing to stay invested in a technology provider with whom they also do business," Tech Mahindra vice-chairman,Vineet Nayyar said. "The investment they have is because of historical reasons." He said BT has indicated that they will exit in an "orderly manner over a period of a few months to a year".
Tech Mahindra is set to merge with Hyderabad-based software services firm Mahindra Satyam, that it acquired in April 2009. The firms are close to appointing merchant bankers for the same. Tech Mahindra, started as an offshore provider to British Telecom, was known as Mahindra British Telecom till the company changed its name and went public in 2006.
BT's contribution to TechM's revenues have been consistently falling over the last few quarters and some of the work that the Indian firm used to do are being currently re-tendered , the management had admitted while announcing its September quarter financial results.
Nayyar said that he hopes to remain as the largest technology service vendor for the British telecommunications firm and BT too sought to keep the commercial relationship going with the Indian firm. Its spokesperson added that the Indian firm remains a "key supplier".
"BT's relationship with Tech Mahindra, as well as with M&M, has been evolving for some time, migrating from a joint partnership/commercial relationship towards a purer standalone commercial relationship, whereby BT's presence as a shareholder/presence on the board no longer has any bearings on the nature of the commercial relationship between the two companies," BT's Thomas said.
However, the firm's revenue contribution has only increased over a period of time. Now, AT&T is believed to be TechM's secondlargest client after BT and is estimated to contribute around $250 million annually to the Indian firm's revenues compared to almost nothing four years ago.
"BT's roles as a significant minority investor and significant customer have been getting diluted, so it is not surprising," a market analyst with a foreign brokerage tracking Indian IT firms said. "I don't see it as having anything to do with the Satyam merger but more as a separation of partners. BT is also no longer as important to Tech Mahindra."
(Source- http://economictimes.indiatimes.com)
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