Satyam and Tech Mahindra to merge Indian IT group Tech Mahindra has confirmed plans to merge with Mahindra Satyam, the company behind India's largest ever corporate fraud case. The planned merger will create a business with combined revenues of about $2.4bn, in a deal expected to create India's fifth-largest IT and outsourcing group by revenues. Satyam was one of India's largest IT companies until 2009, when its former chairman B. Ramalinga Raju confessed to fabricating about $1bn in income, leading to a criminal investigation and the group's near collapse. Tech Mahindra, a telecoms-focused IT services company part-owned by BT of the UK, bought a minority stake in the troubled group later in 2009. BT holds about a 23 per cent stake in Tech Mahindra, having founded the business as a joint venture in 1986. This will turn into a 12.8 per cent shareholding in the new combined group. Anand Mahindra, chairman of Tech Mahindra and head of the wider Mahindra group of companies, on Wednesday said: "The merger will help to propel the combined entity into the top tier of Indian software and services companies." Analysts said that the new group faces a number of challenges, however, in particular addressing an over reliance on telecoms revenues, part of the legacy of their relationship with BT. Ankita Somani, IT and telecoms analyst at Angel Broking in Mumbai, said: "Their telecom business is not growing, and while BT used to be their top client that revenue is now declining too. They need to scale up in others areas. Nearly half of the combined group's revenues will remain in telecoms, but it said it planned to expand aggressively into other areas, including business and enterprise services. C P Gurnani, chief executive of Mahindra Satyam, told the Financial Times: "The Indian outsourcing industry is now $100bn plus and we see plenty of room for growth. We see a big potential to get into an untapped market for IT and engineering services. The combined group, which is expected to drop the tainted Satyam name, also faces two future legal cases, the first relating to a class action law suit following Satyam's difficulties. Satyam agreed to pay $125m to settle one American suit in early 2011, but another case for a further $68m brought by the Aberdeen Group, an asset management company, remains outstanding. The second case relates to a claim for about $125m which India's tax department says is due on revenues stated before the 2009 revelations. The company disputes the claim, arguing that these revenues were subsequently proved to be fictitious. The merger must now be passed by shareholders and seek approval from two Indian state courts, in a process the companies estimate will take about nine months. Tech Mahindra's shares rose more than 5 per cent on news of the merger, to close at Rs685.