Tech Mahindra wins bid to acquire Satyam

By Janaki Krishnan and Saikat Chatterjee

MUMBAI (Reuters) - Indian mid-sized IT outsourcer Tech Mahindra won an auction to buy Satyam Computer Services Ltd, the company at the heart of India's biggest corporate scandal.

Satyam said on Monday Tech Mahindra agreed to buy a 31 percent stake at 58 rupees per share -- a 23 percent premium to Satyam's last closing price. The bid edged out offers from engineering conglomerate Larsen & Toubro, widely seen as a front-runner, and private equity firm WL Ross & Co.

Tech Mahindra, in which Britain's BT Group holds about 31 percent stake, will pay $351 million for 31 percent preferential allotment of new shares.

Satyam's sale is likely to help restore confidence in India's IT services sector at a time the global economic downturn has already slowed growth.

"Tech Mahindra will really have to act fast now and if they don't act fast then client erosion will continue at Satyam," said Tarun Sisodia, head of research at Anand Rathi Financial Services.

Three months ago, Satyam's founder and chairman shocked investors by saying profits had been overstated for years, and put in doubt the survival of a company once ranked as India's fourth-largest software services exporter.

The government quickly stepped in and sacked the board to limit damage to India's once-shining IT services sector.

With the purchase, Tech Mahindra, the sixth-largest Indian outsourcer, will be better equipped to wrestle market share from leading local outsourcing rivals Tata Consultancy Services, Infosys Technologies and Wipro.