By Laton McCartney

Now that mid-sized outsourcer Tech Mahinda has acquired controlling interest in fraud-beset Satyam Computer Services, the new owner must take stock of what exactly it got for its money.

On April 17, Tech Mahinda got approval from India's Company Law Board (CLB) to acquire 31% of Satyam for $351 million. It will also make an offer on the open market to buy an additional 20% of Satyam at an unspecified future date.

In other words, for an estimated $570 million, Tech Mahinda has leapfrogged into the top five rankings of India's multi-billion-dollar outsourcing industry and in theory at least, upgraded its clients list with Satyam's customers.

Problem is Satyam, whose multinational clients include Citigroup, GM, Ford, Nestle and Cisco, is facing enormous problems, including class action lawsuits, defecting employees and a major exodus of clients.

Moreover, Tech Mahinda is acquiring a company whose revenues and accounts are at best uncertain. Since Satyam has to restate accounts for nearly six years, CLB chairman S. Balasubramanian said it would be allowed to file all required documents, including quarterly earnings reports, by December 31. Until then—assuming Satyam makes that deadline—Tech Mahinda may be flying blind when it comes to determining the fiscal status of its new acquisition.

Satyam was plunged into turmoil Jan. 7 when founder B. Ramalinga Raju confessed to vastly inflating Satyam's earnings as part of a $1 billion fraud. Raju and eight others, including two auditors from Price Waterhouse, are currently facing charges of criminal conspiracy, cheating and forgery for allegedly stealing millions of dollars from the company.

In the meantime, Satyam, The Economic Times reported, has lost 46 clients to tech rivals such as Wipro, Accenture, IBM and Tata. Those clients leaving Satyam include Emerson, State Farm Insurance and Australian telco Telstra. Among the rivals benefiting from Satyam's client defections: 3i Infotech, which grabbed Abu Dhabi Bank; Capgemini, which signed on one of Satyam's prized customers, Coca-Cola, to a $100 million seven-year deal; and Cognizant which bagged GlaxoSmithKline.

At this point Satyam is not yet prepared to discuss how it intends to deal with client losses and the other issues it's confronting. "We won't be in a position to discuss integration matters before the deal is consummated, the first phase of which is expected to occur early next week. Even then, it will take some time for the two companies to develop detailed plans," Bob Olivier, Satyam's VP, Global Marketing & Communications told CIOZone.

The good news is that Tech Mahinda is owned by India's Mahindra & Mahindra Ltd and British Telecommunications, both of which have deep pockets. They may well need them to ensure Tech Mahinda's Satyam purchase proves successful.

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