After acquiring 30.58% stake from the promoters, Baring PE Asia plans to merge NIIT Technologies with Hexaware Technologies
The private equity firm will first acquire 30.58 percent stake held by NIIT Technologies’ promoters, the report suggests. As of December 31, 2018, NIIT held 23.58 percent stake and Rajendra Singh Pawar (trustee of Pawar family trust) and Vijay Kumar Thadani (trustee of Thadani family trust) owned 3.53 percent stake each.
According to the newspaper, Baring PE Asia may acquire this stake for about Rs 2,500 crore. The six-month weighted average price of the IT solutions company on the BSE works out to Rs 1,198.72 per share, valuing the promoters’ stake around Rs 2,260 crore.
“The deal will come at a premium to the shareholders of NIIT Technologies and will value the company at Rs 8,000-10,000 crore as against its six-month average market capitalisation of around Rs 7,400 crore,” a source told the newspaper.
The stake purchase is likely to trigger an open offer, allowing Baring PE Asia an opportunity to further raise its stake in the company, the report suggests.
After the buyout, Baring PE Asia reportedly plans to merge NIIT Technologies with Hexaware Technologies. The move is aimed at creating an IT services entity to compete with larger rivals: Mindtree, L&T Infotech, Mphasis and Oracle Financial Services Software.
“At present, both NIIT Technologies and Hexaware are rather smaller IT services firms in the listed space. If the merger goes through, the combined entity will have a market capitalisation (m-cap) of around Rs 20,000 crore, which is more than that of Mindtree and is close to mid-tier IT firms,” a source told the newspaper.
However, as per the report, not all promoters are in favour of transferring control given Baring PE Asia’s demand of eventually merging Mindtree with Hexaware Technologies.
“Baring Asia wants to merge Hexaware with Mindtree because they are finding it tough to monetise their stake directly. Through the merger, Baring will be able to dilute its stake in Hexaware, which is so expensive right now (as compared to its earnings growth) that it is difficult to find a buyer,” a source told the newspaper.
Currently, Baring PE Asia holds 62.79 percent stake in Hexaware Technologies through HT Global IT Solutions Holdings. On August 24, 2018, it sold 8.4 percent stake in Hexaware Technologies for around Rs 1,120 crore.
It all depends on whether Mindtree’s largest shareholder and founder of Café Coffee Day, VG Siddhartha, decides to do with his stake.Baring PE Asia has held discussions with Siddhartha, who owns stake in the Bengaluru-based IT services firm via two of his firms, on paring his stake, the report added.