Mahindra Satyam settles dispute with Upaid for $ 70 Mn

Mahindra Satyam settles dispute with Upaid for $ 70 Mn; to pay Upaid $ 45 Mn upfront; $ 25 Mn in one year; Mahindra Satyam to get worldwide royalty free licence on patent

Mahindra Satyam settles dispute with Upaid for $ 70 Mn. The company will pay Upaid $ 45 Mn upfront and remaining $ 25 Mn in one year. Mahindra Satyam to get worldwide royalty free licence on patent. All pending actions will be dismissed after settlement.

Under its earlier management, an arm of Satyam Computer Services was involved in a project deal with Upaid. After the project, Satyam agreed to sell the patent of the software code (involved in the project) to Upaid. The patent required the signatures of Satyam employees involved in the project, which Upaid later allegedly discovered to be fake, after an employee who had already moved on from Satyam brought it to its notice.

Upaid then filed a case relating to forgery and fraud seeking USD 1 billion in damages. The then Satyam management led by former chairman Ramalinga Raju filed a counter case alleging disparagement.

After the Indian IT giant was crippled with a multi-thousand-crore scam earlier this year, the Mahindra management took over Satyam and had to also take charge of Satyam’s earlier liabilities.

The new Satyam management was earlier ready to offer USD 40 million to Upaid towards an out-of-court settlement, which the latter refused.

Fine print

Post the settlement, all pending actions between the two companies would now be dismissed. The deal also requires Upaid to grant Mahindra Satyam worldwide royalty-free licence on its patent.

Upaid said it cannot comment on the deal as of now.

Mahindra Satyam has two other liabilities — the company’s American Depositary Receipt (ADR) holders have sued it and the third one being associated companies of the Raju family, which claim they had lent Rs 1,230 crore to Satyam’s earlier management.

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“It (the Upaid settlement) is a positive development that will have a good impact on the company and the stock price,” said BSE member and stock broker Dipan Mehta, “but one should not be carried away as we always knew Upaid’s case was a little weak.”

He added that his advice for Satyam shareholders was to switch over to Tech Mahindra, the group’s other IT company, “as it is clear that the two companies will get merged as soon as Satyam’s financials are released and other uncertainties are out of the way.”

“In the merger, the Tech Mahindra shareholder would get a better deal in the exchange ratio because of various valuation parameters like PE and RoC where Tech Mahindra scores higher,” Mehta said.

Manoj Singla, IT Analyst at JPMorgan said that Upaid settlement is a positive for Mahindra Satyam. He said that settlement of $ 70 million is much lower than street estimates and it removes the overhang on the stock. There is no change in price target which remains at Rs 140 for Mahindra Satyam. The market has factored $ 200 million for Upaid and class action suits, he added.

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