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May 30, 2013, 06.12 PM IST | Source: CNBC-TV18

Deal fever hits midcap IT; investors eye MphasiS, Polaris

Electronic Data Systems (EDS) that holds 60 percent in MphasiS and is the subsidiary of HP, has been looking out for prospective buyers. Talks of a possible sale have been taking place since three years and the company has invited bids for selling its stake.

Deal fever seems to have gripped the midcap IT space. The likely sale of MphasiS by Hewlett Packard (HP) and the services businesses of Polaris have kicked up fervour, reports CNBC-TV18's Kritika Saxena.

Electronic Data Systems (EDS) that holds 60 percent in MphasiS and is the subsidiary of HP, has been looking out for prospective buyers. Talks of a possible sale have been taking place since three years and the company has invited bids for selling its stake.

Sources have said that there are a couple of prospective buyers. Private equity players including Bain Capital and Carlyle have submitted their expression of interest. While there are no official confirmations but if at all a private equity player does come into the race, then a large deal could be coming in aside from just an equity buyout.

Aside from that, Genpact and a couple of other IT players could throw their hat in the ring as well. While Genpact has sent an expression of interest, knowing how Genpact reacts, one may not see them going into the final stages of the buyout.

June is said to be the official bid timeline submission.
 
Another company selling its services business is Polaris and the stock today rallied about 10 percent. So far, Cognizant and Infosys are the only serious buyers that have been evaluating this offer. Infosys is typically very conservative. So, whether or not we see Infosys actually looking at buying is a big question. However, Cognizant has been quite active.

While both these players have been looking at niche acquisitions, it does make sense, considering the fact that Citi is a very interesting target for most of these players. Citi is a large client for Polaris and Polaris has around 35 percent of their revenues coming from Citi. So, that really is the key unique selling point (USP) that Polaris has. Both these companies - MphasiS and Polaris are very attractive but for Polaris it is more the Citi USP. MphasiS is largely very attractive with it reporting good performance in the last four quarters, but the reason for MphasiS really is the fact that HP has been consolidating. There are two different reasons, but very attractive assets on the block.

READ MORE ON  IT, midcap, MphasiS, EDS, Citi, Genpact
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