Tech Mahindra ties up Tata Capital, IDFC funds for Satyam

Tech Mahindra raised these funds by issuing debentures which are convertible into shares of Venturbay Consultants, through which it acquired Satyam Computer.

Besides, Tech Mahindra has also borrowed Rs 1,450 crore from various banks, mutual funds, institutions and NBFCs at an interest rate of 10 per cent, part of which has been used for funding the acquisition of Satyam.

Disclosing Tech Mahindra's source of funds for the deal, a regulatory filing by the beleaguered IT firm here said the funding was from "internal resources, optionally convertible domestic debt, equity by Tech Mahindra in Venturbay and debt extended by Tech Mahindra to Venturbay."

In the first phase of acquisition, Tech Mahindra had paid about Rs 1,756 crore for 31 per cent equity through preferential allotment of shares in Satyam which is also listed at NYSE besides Indian bourses.

The filing with the US market regulator SEC said here that "Tech Mahindra has infused funds in Venturebay by using cash on hand" in connection with the initial 31 per cent stake purchase and the subsequent Rs 1,129 crore open offer for further 20 per cent equity.

The funds infused in Venturbay include capital Tech Mahindra previously had with it for "general corporate purposes like capital expenditure and working capital needs."

The capital was raised by Venturbay, a 100 per cent subsidiary of Tech Mahindra, also through issuance of optionally convertible debentures (OCDs). OCDs were issued to Tata Capital for a consideration of Rs 150 crore and another Rs 400 crore to IDFC.

Such OCDs have been issued at an interest rate of 15 per cent and their indebtness matures over a period of 3 years, or might be converted into equity at the end of three years.

Tech Mahindra expects to pay the debt from proceeds from operations and/or future capital raising transactions.

The disclosure about the funding coincides with Satyam declaring its provisional financial results for the quarter ended December 2008 as also the first two months of 2009.

The company recorded a net profit of Rs 160 crore for the quarter, while it had Rs 56 crore profit in January-February period. While the profit for the latest quarter represents a sharp decline from the year-ago levels, the previous quarter results are being restated by the company.

Satyam was acquired last month by Tech Mahindra, which was selected after a bidding process conducted by the government-appointed board at the scam-hit IT firm.

Satyam had plunged into crisis after its founder and then Chairman Ramalinga Raju in January disclosed and admitted to a massive fraud at the company for several past years.