Mahindra Satyam settles Upaid suit for $70 million

Mahindra Satyam Ltd is paying $70 million to Britain-based Upaid Systems Ltd in a patent suit settlement which analysts says lifts uncertainty from the Indian technology outsourcer.

Upaid, which offers solutions for payments via mobile phone, filed lawsuits in April 2007 for fraud, forgery and breach of contract, the British firm said last year."The settlement cost may be high for a company like Satyam, but this at least takes away the uncertainty that was there because of this litigation," said Tejas Doshi, head of research at Sushil Finance in Mumbai."It is surely a positive development, and after this probably the company will move ahead with business and there will be less uncertainty."

Upaid filed the lawsuit in Texas following the revelation of alleged forged documents provided by Satyam, which was technology services provider to the British firm, and was seeking more than $1 billion in damages.

Mahindra Satyam said it would pay $45 million within 10 days of receiving regulatory approval and $25 million within a year of the first payment.

The settlement requires Upaid to give Mahindra Satyam a worldwide royalty-free license on its patents, and provides for the dismissal of all pending actions including the litigation between the companies pending in the U.S. court.

The Upaid litigation was a major overhang on Satyam, which was hit by India's biggest corporate fraud in January when its founder and former chairman shocked investors by saying the company's profits had been overstated for years. Tech Mahindra, a unit of tractor and utility vehicle maker Mahindra & Mahindra, acquired Satyam in April and owns about 43 percent of rebranded Mahindra Satyam.

Satyam also faces class action lawsuits from shareholders in the United States, which were filed after a sharp plunge in its shares listed in New York following the revelation of the fraud in January. The company has also received legal notices claiming a refund of 12.3 billion rupees ($265 million) by 37 companies, which Mahindra Satyam says are "legally untenable".

Ahead of the announcement, shares in Mahindra Satyam ended up 1.3 percent at 102.65 rupees in the main Mumbai market which fell 0.6 percent.

The stock is down 40 percent this year, but has more than doubled since Tech Mahindra bought it in April.