SATYAM: ON THE PATH OF EVOLUTION

The fraud at India’s fourth largest software exporter, Satyam Computer Services Ltd, has kick started a Darwinian consolidation among top-tier Indian IT companies as they pitch for Satyam, in part or whole. The company is still reeling under the revelation of $2 billion fraud by its founder on January 7.

Various companies are in the fray to acquire the company either in part, depending on their core business, or in its entirety. These include, the IT arm of India’s largest engineering company Larsen & Toubro Ltd; fifth largest Indian IT company HCL Technologies Ltd; diversified conglomerate Essar Group; London-based diversified Indian conglomerate Hinduja Group; Indian IT company i-Gate Global Solutions; and Spice Group.

The Indian IT industry is in the next stage of evolution, which commenced with the emergence of a number of companies establishing themselves as industry leaders by virtue of expertise in a certain domain, big clients’ accounts and sheer geographical spread. What now follows is the second stage of evolution, that of, consolidation which will involve mergers and acquisitions (M&As) that will shrink the number of companies in the top tier.

A new wave of M&As will be triggered by the acquirer’s business objectives to expand into new markets and new customers, high-end intellectual property of either process technology or product technology and also to garner new skill sets.