Promoters of Hexaware Technologies Ltd are looking to sell their stake in the information technology services provider along with private equity (PE) investor General Atlantic Llc, three people familiar with the development said.
The founders of the Mumbai-based company have given the mandate to Citigroup Capital Markets Pvt. Ltd to find a buyer.
“The promoters are looking to sell the company if the valuations are attractive,” said the first person with direct knowledge of the development. He declined to be identified, citing sensitivity of the matter. “The PE investor has stayed its course and by next calendar year you will see them exit along with the promoters.”
While General Atlantic owns a 14.9% stake in the company, the promoters own 28.18% stake as on 30 September.
In 2006, General Atlantic had invested Rs.300 crore in Hexaware that had a revenue of Rs.370 crore, valuing the company at Rs.1,700 crore at that time. Hexaware is valued at Rs.2,620 crore, according to calculations based on the closing share price of the stock on Monday. The spokeswoman of Hexaware declined to comment for the story.
In response to an email, the spokesperson for General Atlantic said, “We cannot comment on plans we have for Hexaware or any of (our) portfolio companies.”
Citigroup spokesperson in Mumbai declined to comment.
The promoters are expecting a premium to the current market price from the buyers, according to an investment banker familiar with the development.
“The transaction will go through once the overall economic environment improves and the stock market bounces back which will drive up valuations,” said the banker.
Atul Nishar-promoted Hexaware has around 6,000 employees in 20 countries serving 156 clients. Talks with prospective buyers are at an initial stage, said the third person familiar with the development.
“Given the current state of the market, exit would take time,” the person said.
For the second quarter ended 30 September, Hexaware’s profit rose 54% toRs.64.7 crore from a year earlier. Revenue rose 30% to Rs.366 crore.
“The company is currently trading at 11 times its price to earnings ratio, which is more than the average market, and is an ideal valuation for exit,” said Shrishti Anand, an analyst with Angel Broking Ltd.
The company has managed to get good valuations because of the five large deals that they have won in recent times, according to Anand. “The growth rate is better than the peers and if the company is to be acquired it is for their strong ERP (Enterprise Resource Planning) and PeopleSoft capabilities,” he said.
General Atlantic, which has also invested in Infotech Enterprises Ltd, IBS Software Services and Genpact Ltd, had sold its stake in Patni Computer Systems Ltd earlier this year. In January, Patni was bought by US-based iGate Corp. for Rs.5,540 crore ($1.22 billion). The buyout was backed by PE firmApax Partners. The Patni acquisition was among the biggest in Indian IT industry.
Other large buyouts in the IT sector include EDS Corp. acquiring MphasiS BFL Ltd in 2006 for Rs.1,748 crore, and Oracle Corp. acquiring i-flex Solutions in 2005 for Rs.4,090 crore. PE exits have been muted this year, given the volatility in the stock market which has made listing in the public market difficult for companies.
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