Tech Mahindra to absorb two subsidiaries to cut costs

Tech Mahindra to absorb two subsidiaries to cut costs
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1 Feb, 2021

Information technology (IT) services provider Tech Mahindra on Friday said it looks to merge by absorption the shareholdership of two of its subsidiaries -- Tech Mahindra Business Services and Born Commerce.

A merger by absorption, as per industry parlance, is where companies without liquidation are dissolved. The assets and liabilities of the dissolved firms are transferred to a company that holds their shares, which, in this case, is Tech Mahindra.

In 2019, Tech Mahindra had announced its $95 million all-cash acquisition of New York-based digital media agency Born Group. Born Commerce provides offshore digital media production services.

Tech Mahindra Business Services is the Pune headquartered company’s business process outsourcing (BPO) unit that provides voice-based call centre services, as well as customer related functions to its clients.

The proposed deal, Tech Mahindra said, will result in operational rationalisation and job cuts as the firm aims to achieve reduction under overheads of administrative, managerial and other expenditures. The BPO headcount is reportedly set to be chopped by 5,000 to 38,000 as a larger part of the tasks are completed through automation and artificial intelligence.

On Friday, Tech Mahindra also reported a 14.3% increase in quarterly profits. The company said its profit attributable to shareholders rose to Rs 1,309.8 crore, or Rs 14.87 per share, in the third quarter ended December 2020, from Rs 1,145.9 crore, or Rs 13.03 per share, a year earlier.

Its operational revenue rose 0.07% to Rs 9,647.1 crore for the same period.