Funds affiliated with Baring Private Equity Asia will buy about 30 percent stake in NIIT Technologies from NIIT Ltd and other promoter entities for about Rs 2,627 crore.
The deal will also trigger an open offer under which BPEA will make an offer to the public shareholders of NIIT Technologies for purchasing up to 26 percent additional shareholding — taking the total deal value to up to Rs 4,890 crore.
"Funds affiliated with Baring Private Equity Asia (BPEA) have signed definitive agreements to buy about 18.85 million shares of the company (approximately 30 percent shareholding) from NIIT and other promoter entities at a price of Rs 1,394 per share," NIIT Technologies said in a BSE filing on April 6.
This includes about 14.4 million shares of NIIT, and about 4.3 million shares held by members of families of NIIT founders Rajendra Pawar and Vijay Thadani.
NIIT Limited holds about 23 percent stake, while Pawar and Singh with their families hold around 7 percent shares in NIIT Technologies.
NIIT Technologies shares lost nearly 3 percent in morning on April 8.
The stock has rallied 49 percent in last one year amid rupee depreciation which supported earnings. It was quoting at Rs 1,310.50, down Rs 39.00, or 2.89 percent on the BSE, at 10:06 hours IST.
On the other hand, shares of NIIT were locked in 20 percent upper circuit at Rs 114.50 after stake sale in software company. There were pending buy orders of 281,882 shares, with no sellers available.
In a separate filing, NIIT Technologies said the open offer for up to 1.62 crore fully paid-up equity shares (representing 26 percent stake) will be made by Hulst BV along with The Baring Asia Private Equity Fund VII, LP, The Baring Asia Private Equity Fund VII, LP1 and The Baring Asia Private Equity Fund VII, SCSp.
This transaction is conditional upon customary conditions, including receipt of required regulatory approvals, including anti-trust and competition clearances from the Competition Commission of India.
While maintaining buy on NIIT Limited, Emkay said although the company has not disclosed any plans for the use of the funds, it believes that it would prefer gradual-payouts in the form of buybacks over the years compared with a large special dividend as it would like to secure the future interest of the core business.
"The gradual payouts of cash implies a significant dilution to the return on equity of the business as the cash investments would at best have a 7 percent yield compared with the IT-services business return on equity of over 12 percent in FY19E. The lower return on equity profile would cap the upside," the research house added.
The right balance of buyback-based payouts and efficient capital allocation on inorganic investments in the Corporate Learnings business should work in favor of long-term investors, Emkay believes.
Sameer Kalra - Equity Research Analyst & Founder Target Investing said the deal is slightly negative for NIIT Technologies minority shareholders as the premium is very low on the open offer which might have low response or revised price. "And PE buyout might result in some management changes and client outlook."
But he believes this is big positive for NIIT Ltd. "Shareholders as the transaction will result in company receiving Rs 2,000 crore approximately for their 23 percent in NIIT Tech which amounts to Rs 120 per share as per current price of Rs 95 per share."Disclaimer: The above report is compiled from information available on public platforms. Moneycontrol advises users to check with certified experts before taking any investment decisions.