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Tech Mahindra Soars on Debut

Ray Le Maistre
8/29/2006

If anyone needed confirmation that the Indian telecom market is hot, they should look no further than the stock market debut of Tech Mahindra Ltd. , which joined the Bombay Stock Exchange on Monday.

The telecom software and services firm, which outlined its IPO plans earlier this summer, launched its shares subscription process on August 1. By the time that process ended on August 4, the 12.75 million shares on offer, about 11 percent of its total capital, were oversubscribed 78 times, leading Tech Mahindra to price its shares at 365 Indian Rupees ($7.85), the top end of its proposed price band. (See Tech Mahindra to IPO.)

And when the shares started trading in Bombay on Monday, they opened at Rs525, up 44 percent, and closed the day at Rs552.8, up more than 51 percent, giving the company a market valuation of about Rs64 billion ($1.4 billion).

Tuesday trading saw the price ease by about 2 percent to Rs541.

The company, which changed its name in February this year, raised Rs4.65 billion ($100 million) from the IPO, and will use the funds to build a new facility at Rajiv Gandhi Infotech Park in Hinjewadi, Pune, to house about 9,000 staff. (See MBT Becomes Tech Mahindra.)

That project is part of a broader expansion that includes last year's $54 million acquisition of U.S.-based telecom research and services firm Axes Technologies, and a recently announced services development partnership with Motorola Inc. (NYSE: MOT). (See Moto Makes New Friends, Tech Mahindra, Moto Team, and Mahindra-BT Picks Up Axes.)

The expansion should result in a broader range of revenue sources, as the company is highly reliant on its main customer and shareholder BT Group plc (NYSE: BT; London: BTA), which accounted for about 70 percent of its Rs12.43 billion ($267 million) revenues in the year ended March 31. Pre-tax profits were Rs2.35 billion ($50.5 million) in the same period.

BT still holds 36 percent of Tech Mahindra, while Indian vehicle manufacturer Mahindra & Mahindra holds about 51 percent.

Tech Mahindra is one of a number of companies that feature in our current Who Does What: Outsourcing to India report, which aims to identify and categorize the Indian telecom outsourcing companies being used by carriers, vendors, and developers worldwide.

— Ray Le Maistre, International News Editor, Light Reading

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