MphasiS shares end 8% up on reports of stake sale by HP

Shares of information technology company MphasiS ended up 8 percent on Thursday after gaining as much as 14 percent in afternoon trade on news that the parent company Hewlett Packard is looking to sell its entire stake in the company, valued at Rs 5800 crore.

The stock hit a fresh 52-week high of Rs 513. At 1311 IST, shares of Mphasis were trading up 12 percent at Rs 501.35.

IT major HP will seek premium of at least 10-12 percent to Mphasis' current market price, reports CNBC-TV18's Kritika Saxena quoting sources. HP currently holds 60 percent stake in MphasiS via EDS and is also one of the major customers of the Indian company.

Genpact may have also submitted expression of interest for the deal, sources said. Apart from this, private equity players like Bain Capital, Carlyle have also submitted their EOI for the deal. 

HP is likely to collate the bids for the deal by June. Deal will take at least two to three quarter to fructify. While HP will continue to outsource its IT activities to MphasiS, it is likely to scale down the contracts going forward as it may restructure IT contracts across vendors, sources said.

MphasiS has been trying to ramp-up its non-HP or direct business since many quarters. During the January-March, the company's direct business contributed 54 percent of the revenue against 48 percent in previous quarter. The company follows calendar year as a financial year.

"Direct channel revenues now represent an annual run rate of $572 million. The direct business saw a healthy addition of 10 new logos out of which six were in the company's focus verticals of Banking and Capital Market (four additions), and Insurance (two additions)," MphasiS said in earnings release on Wednesday.

The company reported consolidated revenue of Rs 1405 crore, up 11.8 percent sequentially and 5.8 percent year-on-year. The company completed the acquisition of Digital Risk in February. In the current quarter, Digital Risk secured a contract worth USD 60 million plus from a BFSI customer.

The company's net profit in second quarter declined 4.3 percent sequentially and 6.8 per cent on year to Rs 177 crore on lower other income as the company deployed cash on acquisition of Digital Risk. The company operating margins for the quarter stood at 14.7 percent down from 15.5 percent in first quarter.